SCHRODER CAPITAL FUNDS /DELAWARE/, 497, 2000-03-03

SCHRODER CAPITAL FUNDS /DELAWARE/
497, 2000-03-03

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Schroders

PROSPECTUS

March 1, 2000

Schroder Capital Fund (Delaware)

Schroder Emerging Markets Fund Institutional Portfolio

Investor Shares

This Prospectus describes Schroder Emerging Markets Fund Institutional
Portfolio, a series of shares of Schroder Capital Funds (Delaware) (the
"Trust"). The Fund seeks long-term capital appreciation through direct or
indirect investment in equity and debt securities of issuers domiciled or doing
business in emerging market countries in regions such as Southeast Asia, Latin
America, and Eastern and Southern Europe.

Schroder Investment Management North America Inc. ("Schroder") manages the Fund.
You can call the Trust at (800) 464-3108 to find out more about the Fund and
other funds in the Schroder family.

This Prospectus explains what you should know about the Fund before you invest.
Please read it carefully.

Neither the U.S. Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
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TABLE OF CONTENTS

Page
----

SUMMARY INFORMATION 1

FEES AND EXPENSES 4

OTHER INVESTMENT STRATEGIES AND RISKS 5

MANAGEMENT OF THE FUND 10

HOW THE FUND'S SHARES ARE PRICED 11

HOW TO BUY SHARES 11

HOW TO SELL SHARES 14

DIVIDENDS AND DISTRIBUTIONS 15

TAXES 16

FINANCIAL HIGHLIGHTS 17
<PAGE>

SUMMARY INFORMATION

This summary identifies the investment objective, principal investment
strategies, and principal risks of Schroder Emerging Markets Fund Institutional
Portfolio. The Fund's investment objective may not be changed without
shareholder approval. The investment policies of the Fund may, unless otherwise
specifically stated, be changed by the Trustees of the Trust without a vote of
the Fund's shareholders.

The summary for the Fund includes a bar chart that shows how the investment
returns of the Fund's Investor Shares have varied from year to year. The bar
chart shows returns for each full calendar year since the Fund commenced
operations. The table following the bar chart shows how the Fund's average
annual returns for the last year and for the life of the Fund compare to a
broad-based securities market index. The bar chart and table provide some
indication of the risks of investing in the Fund by showing the variability of
its returns and by comparing the Fund's performance to a broad measure of market
performance. Past performance is not necessarily an indication of future
performance. It is possible to lose money on an investment in the Fund.

o Investment Objective. To seek long-term capital appreciation through
direct or indirect investment in equity and debt securities of issuers
domiciled or doing business in emerging market countries in regions such
as Southeast Asia, Latin America, and Eastern and Southern Europe.

o Principal Investments Strategies. The Fund normally invests at least 65%
of its total assets in securities of companies determined by Schroder to
be "emerging market" issuers. The Fund may invest the remaining 35% of its
total assets in securities of issuers located anywhere in the world. The
Fund may invest in equity or debt securities of any kind.

The Fund invests primarily in equity securities of issuers domiciled or
doing business in "emerging market" countries in regions such as Southeast
Asia, Latin America, Eastern and Southern Europe, and Africa. "Emerging
market" countries are countries not included at the time of investment in
the Morgan Stanley International World Index of major world economies.
Countries currently in the Index (and therefore generally not considered
to be "emerging market" countries) include: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, the United Kingdom, and the United States. Schroder
may at times determine based on its own analysis that an economy included
in the Index should nonetheless be considered an emerging market country,
in which case that country would constitute an emerging market country for
purposes of the Fund's investments. There is no limit on the amount of the
Fund's assets that may be invested in securities of issuers domiciled in
any one emerging market country.

The Fund invests in issuers and countries that Schroder believes offer the
potential for capital growth. In identifying candidates for investment,
Schroder considers a variety of factors, including the issuer's likelihood
of above average earnings growth, the securities' attractive relative
valuation, and whether the issuer has any proprietary advantages. In
addition, Schroder considers the risk of local political and/or economic
instability associated with particular countries and regions and the
liquidity of local markets. The Fund generally sells securities when they
reach fair valuation or when significantly more attractive investment
candidates become available.

The Fund also may do the following:

>> Invest in securities of closed-end investment companies that invest
primarily in foreign securities, including securities of emerging
market issuers.

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>> Invest up to 35% of its assets in debt securities, including
lower-quality, high yielding debt securities (commonly known as
"junk bonds"), which entail certain risks.

o Principal Risks.

>> Emerging Markets. The Fund may invest in "emerging market" countries
whose securities markets may experience heightened levels of
volatility. The risks of investing in emerging markets include
greater political and economic uncertainties than in foreign
developed markets, currency transfer restrictions, a more limited
number of potential buyers, and an emerging market country's
dependence on revenue from particular commodities or international
aid. Additionally, the securities markets and legal systems in
emerging market countries may only be in a developmental stage and
may provide few, or none, of the advantages or protections of
markets or legal systems available in more developed countries.
Emerging market countries may experience extremely high levels of
inflation, which may adversely affect those countries' economies,
currencies, and securities markets. Also, emerging market issuers
are often smaller and less well- known than larger, more widely held
companies and involve certain special risks associated with smaller
capitalization companies.

>> Foreign Securities. Investments in foreign securities entail risks
not present in domestic investments including, among others, risks
related to political or economic instability, currency exchange, and
taxation.

>> Geographic Concentration. There is no limit on the amount of
the Fund's assets that may be invested in securities of issuers
domiciled in any one country, although the Fund will normally invest
in at least three countries other than the United States. To the
extent that the Fund invests a substantial amount of its assets in
one country, it will be more susceptible to the political and
economic developments and market fluctuations in that country than
if it invested in a more geographically diversified portfolio.

>> Non-Diversified Mutual Fund. The Fund is a "non-diversified"
mutual fund, and will invest its assets in a more limited number of
issuers than may diversified investment companies. To the extent the
Fund focuses on fewer issuers, its risk of loss increases if the
market value of a security declines or if an issuer is not able to
meet its obligations.

>> Equity Securities. Another risk of investing in the Fund is
the risk that the value of the equity securities in the portfolio
will fall, or will not appreciate as anticipated by Schroder, due to
factors that adversely affect markets generally or particular
companies in the portfolio.

>> Debt Securities. The Fund may invest in debt securities, which
are subject to market risk (the fluctuation of market value in
response to changes in interest rates) and to credit risk (the risk
that the issuer may become unable or unwilling to make timely
payments of principal and interest).

>> Junk Bonds. Securities rated below investment grade ("junk
bonds") lack outstanding investment characteristics and have
speculative characteristics and are subject to greater credit and
market risks than higher-rated securities. The lower ratings of junk
bonds reflect a greater possibility that adverse changes in the
financial condition of the issuer or in general economic conditions,
or an unanticipated rise in interest rates, may impair the ability
of the issuer to make payments of interest and principal. If this
were to occur, the values of securities held by the Fund may become
more volatile.

<PAGE>

The bar chart below does not reflect the purchase or redemption charges
imposed on purchases and redemptions of the Fund's Shares. If the bar chart did
reflect these charges, returns would be less than those shown.

Schroder Emerging Markets Fund Institutional Portfolio
Investor Shares

[GRAPHIC OMITTED]

[The following table was depicted as a bar chart in the printed material.]

Calendar Year End

1996 1997 1998 1999

Annual Return 7.93% -5.12& -25.29% 62.62%

During the periods shown above, the highest quarterly return was 27.35% for the
quarter ended December 31, 1999, and the lowest was -21.96% for the quarter
ended September 30, 1998.

- --------------------------------------------------------------------------------
Average Annual Total Returns* Life of Fund
(for periods ending December 31, 1999) One Year (since 3/31/95)
- --------------------------------------------------------------------------------
Schroder Emerging Markets Fund Institutional 61.00% 6.09%
Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley Capital International Emerging 66.41% 7.50%
Markets Free Index **
- --------------------------------------------------------------------------------

*Unlike the bar chart, the Fund's average annual total returns shown in
the table above reflect the impact of a 0.50% purchase charge at the time of
purchase and a 0.50% redemption charge deducted at the end of each period. The
Index to which the Fund's average annual returns are compared do not reflect the
imposition of such charges.

**The Morgan Stanley Capital International Emerging Markets Free Index is
an unmanaged, market capitalization index of companies representative of the
market structure of 25 emerging countries in Europe, Latin America, and the
Pacific Basin. The Index represents actual buyable opportunities for the
non-domestic investor by taking into account local market restrictions on share
ownership by foreigners. For periods prior to November 30, 1998, returns
represent the MSCI EMF Index (ex-Malaysia).

<PAGE>

FEES AND EXPENSES

These tables describe the fees and expenses that you may pay if you buy and hold
Investor Shares of the Fund.

Shareholder Fees (paid directly from your investment):
Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Purchase Charge (based on amount invested)(1) 0.50%
Redemption Charge (as a percentage of the net asset value
of shares redeemed)(1) 0.50%

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Management Fees(2) 1.10%
Distribution (12b-1) Fees None
Other Expenses 0.23%
Total Annual Fund Operating Expenses 1.33%
Fee Waiver and/or Expense Limitation(3) 0.15%
Net Expenses(3) 1.18%

- ----------

(1) The Purchase and Redemption Charges are collected and retained by the Fund
to compensate the other investors in the Fund for expenses incurred in
connection with purchases and sales of portfolio securities.

(2) Management Fees include all fees payable to Schroder and its affiliates for
investment advisory and fund administration services.

(3) The Net Expenses shown above reflect the effect of contractually imposed
expense limitations and/or fee waivers, in effect through October 31, 2000, on
the Total Annual Fund Operating Expenses of the Fund.

Example

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in Investor Shares of the Fund for
the time periods indicated and either retain all of your shares or redeem all of
your shares at the end of those periods. The Example assumes that you pay a
0.50% Purchase Charge at the time of purchase and a 0.50% Redemption Charge at
the time of redemption. The Example also assumes that your investment earns a 5%
return each year and that the Fund's Total Annual Fund Operating Expenses remain
the same as those set forth above (absent the noted Fee Waiver and/or Expense
Limitation). Your actual costs may be higher or lower. Based on these
assumptions, your costs would be:

1 year 3 years 5 years 10 years
------ ------- ------- --------
Assuming no redemption* $186 $472 $780 $1,652
Assuming full redemption
at end of period* $238 $528 $839 $1,723

* Assuming that the Fund's operating expenses remain the same as the Net
Expenses set forth above, based on the other assumptions described above, your
costs would be as follows for 1 year, 3 years, 5 years, and 10 years,
respectively: $171, $425, $699, and $1,481 (assuming no redemption) or $222,
$481, $759, and $1,553 (assuming full redemption at end of period).

<PAGE>

OTHER INVESTMENT STRATEGIES AND RISKS

The Fund may not achieve its objective in all circumstances. The following
provides more detail about the Fund's principal risks and the circumstances
which could adversely affect the value of the Fund's shares or its total return
or yield. It is possible to lose money by investing in the Fund.

Risks of Investing in the Fund

>> Emerging Markets. The Fund intends to invest primarily in securities
of "emerging market" issuers, which are those domiciled or doing
business in emerging market countries. Specifically, an issuer will
be considered to be an emerging market issuer if Schroder determines
that: (1) it is organized under the laws of an emerging market
country; (2) its primary securities trading market is in an emerging
market country; (3) at least 50% of the issuer's revenues or profits
are derived from goods produced or sold, investments made, or
services performed in emerging market countries; or (4) at least 50%
of its assets are situated in emerging market countries.

The prices of securities of issuers in emerging market countries are
subject to greater volatility than those of issuers in more
developed countries. Investments in emerging market countries may
present market, credit, currency, liquidity, legal, political, and
other risks different from, or greater than, the risks of investing
in developed foreign countries. See "Foreign Securities" below. For
example, the securities markets and legal systems in emerging market
countries may only be in a developmental stage and may provide few,
or none, of the advantages or protections of markets or legal
systems available in more developed countries. Although many of the
securities in which the Fund may invest are traded on securities
exchanges, they may trade in limited volume, and the exchanges may
not provide all of the conveniences or protections provided by
securities exchanges in more developed markets. The Fund may also
invest a substantial portion of its assets in securities traded in
the over-the-counter markets in emerging market countries and not on
any exchange, which may affect the liquidity of the investment and
expose the Fund to the credit risk of its counterparties in trading
those investments. Emerging market countries may experience
extremely high rates of inflation, which may adversely affect those
countries' economies and securities markets.

Certain Asian markets have experienced devaluation and/or
significant volatility during the past several years. To the extent
that the Fund focuses its investments in any Asian countries, the
Fund's investment performance will be particularly sensitive to
political, economic, market, and other factors affecting those
countries and issuers in those countries.

>> Foreign Securities and Currencies. Except as otherwise noted in this
Prospectus, there is no limit on the amount of the Fund's assets
that may be invested in foreign securities. Investments in foreign
securities entail certain risks. There may be a possibility of
nationalization or expropriation of assets, confiscatory taxation,
political or financial instability, and diplomatic developments that
could affect the value of the Fund's investments in certain foreign
countries. Since foreign securities normally are denominated and
traded in foreign currencies, the values of the Fund's assets may be
affected favorably or unfavorably by currency exchange rates,
currency exchange control regulations, foreign withholding taxes,
and restrictions or prohibitions on the repatriation of foreign
currencies. There may be less information publicly available about a
foreign issuer than about a U.S. issuer, and foreign issuers are not
generally subject to accounting, auditing, and financial reporting
standards and practices comparable to those

<PAGE>

in the United States. The securities of some foreign issuers are
less liquid and at times more volatile than securities of comparable
U.S. issuers. Foreign brokerage commissions and other fees are also
generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as
delay in payment or delivery of securities or in the recovery of the
Fund's assets held abroad) and expenses not present in the
settlement of domestic investments.

In addition, legal remedies available to investors in certain
foreign countries may be more limited than those available to
investors in the United States or in other foreign countries. The
willingness and ability of foreign governmental entities to pay
principal and interest on government securities depends on various
economic factors, including the issuer's balance of payments,
overall debt level, and cash-flow considerations related to the
availability of tax or other revenues to satisfy the issuer's
obligations. If a foreign governmental entity defaults on its
obligations on the securities, the Fund may have limited recourse
available to it. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located in
those countries.

If the Fund purchases securities denominated in foreign currencies,
a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's
assets and the Fund's income available for distribution. Officials
in foreign countries may from time to time take actions in respect
of their currencies, which could significantly affect the value of a
Fund's assets denominated in those currencies or the liquidity of
such investments. For example, a foreign government may unilaterally
devalue its currency against other currencies, which would typically
have the effect of reducing the U.S. dollar value of investments
denominated in that currency. A foreign government may also limit
the convertibility or repatriation of its currency or assets
denominated in its currency, which would adversely affect the U.S.
dollar value and liquidity of investments denominated in that
currency. In addition, although at times most of the Fund's income
may be received or realized in these currencies, the Fund will be
required to compute and distribute its income in U.S. dollars. As a
result, if the exchange rate for any such currency declines after
the Fund's income has been earned and translated into U.S. dollars
but before payment to shareholders, the Fund could be required to
liquidate portfolio securities to make such distributions.
Similarly, if the Fund incurs an expense in U.S. dollars and the
exchange rate declines before the expense is paid, the Fund would
have to convert a greater amount of U.S. dollars to pay for the
expense at that time than it would have had to convert at the time
the Fund incurred the expense. The Fund may, but is not required to,
buy or sell foreign currencies and options and futures contracts on
foreign currencies for hedging purposes in connection with its
foreign investments.

Special tax considerations apply to foreign securities. In
determining whether to invest the Fund's assets in debt securities
of foreign issuers, Schroder considers the likely impact of foreign
taxes on the net yield available to the Fund and its shareholders.
Income and/or gains received by the Fund from sources within foreign
countries may be reduced by withholding and other taxes imposed by
such countries. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. Any such taxes
paid by the Fund will reduce its income available for distribution
to shareholders. In certain circumstances, the Fund may be able to
pass through to shareholders credits for foreign taxes paid.

>> Debt Securities. The Fund may invest in debt securities, which are
subject to the risk of fluctuation of market value in response to
changes in interest rates and the risk that the

<PAGE>

issuer may default on the timely payment of principal and interest.
Additionally, the Fund may invest in junk bonds, which are
lower-quality, high-yielding debt securities rated below Baa or BBB
by Moody's Investors Service, Inc. or Standard & Poor's Ratings
Services (or, if they are unrated, determined by Schroder to be of
comparable quality). See the Statement of Additional Information for
further descriptions of securities ratings assigned by Moody's and
Standard & Poor's. Lower-rated debt securities are predominantly
speculative and tend to be more susceptible than other debt
securities to adverse changes in the financial condition of the
issuer, general economic conditions, or an unanticipated rise in
interest rates, which may affect an issuer's ability to pay interest
and principal. This would likely make the values of the securities
held by the Fund more volatile and could limit the Fund's ability to
liquidate its securities. Changes by recognized rating services in
their ratings of any fixed-income security and in the perceived
ability of an issuer to make payments of interest and principal also
may affect the value of these investments.

>> U.S. Government Securities. U.S. Government securities include a
variety of securities that differ in their interest rates,
maturities, and dates of issue. Securities issued or guaranteed by
agencies or instrumentalities of the U.S. Government may or may not
be supported by the full faith and credit of the United States or by
the right of the issuer to borrow from the U.S. Treasury.

>> Risk of Smaller Capitalization Companies. The Fund may invest in
companies that are smaller and less well known than larger, more
widely held companies. Small and mid-cap companies may offer greater
opportunities for capital appreciation than larger companies, but
may also involved certain special risks. They are more likely than
larger companies to have limited product line, markets or financial
resources, or to depend on a small, inexperienced management group.
Securities of smaller companies may offer greater opportunities for
capital appreciation than larger companies, but may also involve
certain special risks. They are more likely than larger companies to
have limited product lines, markets or financial resources, or to
depend on a small, inexperienced management group. Securities of
smaller companies may trade less frequently and in lesser volume
than more widely held securities and their values may fluctuate more
sharply than other securities. They may also trade in the
over-the-counter market or on a regional exchange, or may otherwise
have limited liquidity. These securities may therefore be more
vulnerable to adverse developments than securities of larger
companies and the Fund may have difficulty establishing or closing
out its securities positions in smaller companies at prevailing
market prices. Also, there may be less publicly available
information about smaller companies or less market interest in their
securities as compared to larger companies, and it may take longer
for the prices of the securities to reflect the full value of their
issuers' earnings potential or assets.

Other Investment Strategies and Techniques

In addition to the principal investment strategies described in the Summary
Information section above, the Fund may at times use the strategies and
techniques described below, which involve certain special risks. This Prospectus
does not attempt to disclose all of the various investment techniques and types
of securities that Schroder might use in managing the Fund. As in any mutual
fund, investors must rely on the professional investment judgment and skill of
the Fund's adviser.

<PAGE>

forces of supply and demand in the foreign exchange markets. These
forces are affected by the international balance of payments and
other political, economic, and financial conditions, which may be
difficult to predict. The Fund may engage in currency exchange
transactions to protect against unfavorable fluctuations in exchange
rates.

In particular, the Fund may enter into foreign currency exchange
transactions to protect against a change in exchange rates that may
occur between the date on which the Fund contracts to trade a
security and the settlement date ("transaction hedging") or in
anticipation of placing a trade ("anticipatory hedging"); to "lock
in" the U.S. dollar value of interest and dividends to be paid in a
foreign currency; or to hedge against the possibility that a foreign
currency in which portfolio securities are denominated or quoted may
suffer a decline against the U.S. dollar ("position hedging").

From time to time, the Fund's currency hedging transactions may call
for the delivery of one foreign currency in exchange for another
foreign currency and may at times involve currencies in which its
portfolio securities are not then denominated ("cross hedging"). The
Fund may also engage in "proxy" hedging, whereby the Fund would seek
to hedge the value of portfolio holdings denominated in one currency
by entering into an exchange contract on a second currency, the
valuation of which Schroder believes correlates to the value of the
first currency.

The Fund may buy or sell currencies in "spot" or forward
transactions. "Spot" transactions are executed contemporaneously on
a cash basis at the then-prevailing market rate. A forward currency
contract is an obligation to purchase or sell a specific currency at
a future date (which may be any fixed number of days from the date
of the contract agreed upon by the parties) at a price set at the
time of the contract. Forward contracts do not eliminate
fluctuations in the underlying prices of securities and expose the
Fund to the risk that the counterparty is unable to perform.

The Fund incurs foreign exchange expenses in converting assets from
one currency to another. Although there is no limit on the amount of
the Fund's assets that may be invested in foreign currency exchange
and foreign currency forward contracts, the Fund may enter into such
transactions only to the extent necessary to effect the hedging
transactions described above. Suitable foreign currency hedging
transactions may not be available in all circumstances and there can
be no assurance that the Fund will utilize hedging transactions at
any time.

>> Securities Loans, Repurchase Agreements, and Forward Commitments.
The Fund may lend portfolio securities to broker-dealers up to
one-third of the Fund's total assets. The Fund may also enter into
repurchase agreements without limit. These transactions must be
fully collateralized at all times, but involve some risk to the Fund
if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral. The Fund may
also enter into contracts to purchase securities for a fixed price
at a future date beyond customary settlement time, which may
increase its overall investment exposure and involves a risk of loss
if the value of the securities declines prior to the settlement
date.

<PAGE>

value per share. As a shareholder in an investment company, the Fund
would bear its ratable share of the investment company's expenses,
including advisory and administrative fees, and would at the same
time continue to pay its own fees and expenses.

>> Derivative Instruments. To the extent permitted by the Fund's
investment policies as set forth in this Prospectus or listed in the
Statement of Additional Information, instead of investing directly
in the types of portfolio securities described in the Summary
Information section above, the Fund may buy or sell a variety of
"derivative" instruments to gain exposure to particular securities
or markets, in connection with hedging transactions, and to increase
total return. These may include options, futures, and indices, for
example. Derivatives involve the risk that they may not work as
intended due to unanticipated developments in market conditions or
other causes. Also, derivatives often involve the risk that the
other party to the transaction will be unable to close out the
position at any particular time or at an acceptable price.

>> Zero-Coupon Bonds. The Fund may invest in zero-coupon bonds.
Zero-coupon bonds are issued at a significant discount from face
value and pay interest only at maturity rather than at intervals
during the life of the security. Zero-coupon bonds allow an issuer
to avoid the need to generate cash to meet current interest payments
and, as a result, may involve greater credit risks than bonds that
pay interest currently. A Fund investing in zero-coupon bonds is
required to distribute the income on these securities as the income
accrues, even though the Fund is not receiving the income in cash on
a current basis. Thus, the Fund may have to sell other investments,
including when it may not be advisable to do so, to make income
distributions.

>> Portfolio Turnover. The length of time the Fund has held a
particular security is not generally a consideration in investment
decisions. The investment policies of the Fund may lead to frequent
changes in the Fund's investments, particularly in periods of
volatile market movements. A change in the securities held by the
Fund is known as "portfolio turnover." Portfolio turnover generally
involves some expense to the Fund, including brokerage commissions
or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such sales may
increase the amount of capital gains (and, in particular, short-term
gains) realized by the Fund, on which shareholders may pay tax.

>> Temporary Defensive Strategies. At times, Schroder may judge that
conditions in the securities markets make pursuing the Fund's basic
investment strategy inconsistent with the best interests of its
shareholders. At such times, Schroder may temporarily use alternate
investment strategies primarily designed to reduce fluctuations in
the value of the Fund's assets. In implementing these "defensive"
strategies, the Fund would invest in high-quality fixed-income
securities, cash, or money market instruments to any extent Schroder
considers consistent with such defensive strategies. It is
impossible to predict when, or for how long, the Fund will use these
alternate strategies. One risk of taking such temporary defensive
positions is that the Fund may not achieve its investment objective.

>> Other Investments. The Fund may also invest in other types of
securities and utilize a variety of investment techniques and
strategies, which are not described in this Prospectus. These
securities and techniques may subject the Fund to additional risks.
Please see the Statement of Additional Information for additional
information about the

<PAGE>

securities and investment techniques described in this Prospectus
and about additional techniques and strategies that may be used by
the Fund.

MANAGEMENT OF THE FUND

The Trust is governed by a Board of Trustees, which has retained Schroder to
manage the investments of the Fund. Subject to the control of the Trustees,
Schroder also manages the Fund's other affairs and business.

Schroder (itself and its predecessors) has been an investment manager since
1962, and currently serves as investment adviser to the Fund, other mutual
funds, and a broad range of institutional investors. Schroder's ultimate parent,
Schroders plc, and its affiliates currently engage in the investment banking and
asset management businesses, and as of June 30, 1999, had in the aggregate
assets under management of approximately $208 billion. In January 2000,
Schroders plc agreed to sell its worldwide investment banking business to
Salomon Smith Barney. The transaction, which is expected to be completed by May
2000, is subject to regulatory approvals and satisfaction of closing conditions.
Schroders plc will retain its asset management business.

>> Investment Advisory Fees. Prior to June 1, 1999, the Fund invested
substantially all of its investible assets in Schroder Emerging
Markets Fund Institutional Portfolio (the "Portfolio"), a separate
portfolio of Schroder Capital Funds, an investment company also
managed by Schroder. During this time, the Fund paid investment
advisory fees indirectly through the Portfolio, and did not pay
advisory fees directly to Schroder. Since June 1, 1999, the Fund has
paid investment advisory fees directly to Schroder according to the
same contractual fee rate previously paid at the Portfolio level.
For the fiscal year ended October 31, 1999, the Fund paid investment
advisory fees to Schroder (both directly and indirectly through the
Portfolio) at the annual rate of .88%, of the average daily net
assets of the Fund. The amount paid by the Fund reflects the effect
of the expense limitations and/or fee waivers in place for the Fund
described below.

>> Portfolio Managers. Schroder's investment decisions for the Fund are
made by the investment team listed below, with the assistance of an
investment committee. The following portfolio managers have had
primary responsibility for making investment decisions for the Fund
and the Portfolio in which the Fund previously invested since
inception. Their recent professional experience is also shown.

Portfolio Manager Since Recent Professional
----------------- ----- -------------------
Experience
----------

John Troiano Inception (1995) Employed as an investment
professional at Schroder since
1986. Mr. Troiano is the Chief
Executive and a Director of
Schroder, and a Vice President of
the Trust, Schroder Capital
Funds, and Schroder Series Trust

<PAGE>

Heather Crighton Inception (1995) Employed as an investment
professional at Schroder since
1993. Ms. Crighton is a Director
and a Senior Vice President of
Schroder.

Mark Bridgeman Inception (1995) Employed as an investment
professional at Schroder since
1990. Mr. Bridgeman is a First
Vice President of Schroder.

HOW THE FUND'S SHARES ARE PRICED

The Fund calculates the net asset value of its Investor Shares by dividing the
total value of its assets attributable to its Investor Shares, less its
liabilities attributable to those shares, by the number of Investor Shares
outstanding. Shares are valued as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern Time) each day the Exchange is open. The
Trust expects that days, other than weekend days, that the Exchange will not be
open are New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. The Fund values its portfolio securities for which market
quotations are readily available at market value. Short-term investments that
will mature in 60 days or less are stated at amortized cost, which approximates
market value. The Fund values securities and assets for which market values are
not ascertainable at their fair values as determined in accordance with
procedures adopted by the Board of Trustees. All assets and liabilities of the
Fund denominated in foreign currencies are translated into U.S. dollars based on
the mid-market price of such currencies against the U.S. dollar at the time when
last quoted. Because certain of the securities in which the Fund may invest may
trade on days when the Fund does not price its Investor Shares, the net asset
value of the Fund's Investor Shares may change on days when shareholders will
not be able to purchase or redeem their Investor Shares. The net asset value of
the Fund's Investor Shares will generally differ from that of its Advisor Shares
due to the variance in dividends paid on each class of shares and differences in
the expenses of Investor Shares and Advisor Shares.

HOW TO BUY SHARES

You may purchase Investor Shares of the Fund directly from the Trust (through
Schroder Fund Advisors Inc., the distributor of the Trust's shares), or through
a service organization such as a bank, trust company, broker-dealer, or other
financial organization (a "Service Organization") having an arrangement with
Schroder Fund Advisors Inc. If you do not have a Service Organization, Schroder
Fund Advisors Inc. can provide you with a list of available firms. Your Service
Organization is responsible for forwarding all of the necessary documentation to
the Trust, and may charge you separately for its services.

Investor Shares of the Fund are sold at their net asset value next determined
after the Trust receives your order, plus a purchase charge of 0.50% of the
amount invested. The purchase charge, which is not a sales charge, is assessed
and retained by the Fund to compensate other investors in the Fund for expenses
incurred in purchasing securities due to an investment in the Fund. The purchase
charge is not assessed on the reinvestment of dividends or distributions or on
purchases through an in-kind subscription. In order for you to receive the
Fund's next determined net asset value, the Trust must receive your order before
the close of regular trading on the New York Stock Exchange.

If the Investor Shares you purchase will be held in your own name (rather than
in the name of your Service Organization), your payment for the shares must be
accompanied by a completed Account Application in proper form. The Trust or the
Trust's Transfer Agent, Boston Financial Data Services,

<PAGE>

Inc. (the "Transfer Agent") may request and delay acceptance of your order
pending receipt of additional documentation, such as copies of corporate
resolutions and instruments of authority, from corporations, administrators,
executors, personal representatives, directors, or custodians. You may obtain
Account Applications from the Transfer Agent at the addresses listed below under
"Purchases by Check", by calling the Trust at (800) 464-3108, or from your
Service Organization.

Investment Minimums

The minimum investments for initial and additional purchases of Investor Shares
of the Fund are as follows:

Initial Additional
Investment Investments
---------- -----------
Regular Accounts $1,000,000 No minimum

The Trust may, in its sole discretion, accept smaller initial or subsequent
investments. The Trust does not issue share certificates.

You also may meet the minimum initial investment requirement based on cumulative
purchases by means of a written Statement of Intention, expressing your
intention to invest at least the minimum investment amount applicable to the
Fund, or more, in Investor Shares within 13 months. You may enter into a
Statement of Intention in conjunction with your initial investment in Investor
Shares by completing the appropriate section of the Account Application. Current
Fund shareholders can obtain a Statement of Intention form by contacting the
Transfer Agent. The Trust reserves the right to redeem your shares in the Fund
if you do not invest at least the minimum initial investment amount applicable
to your account by the end of the Statement of Intention period (taking into
account amounts you redeem during the period).

The Trust is authorized to reject any purchase order and to suspend the offering
of its shares for any period of time. The Trust may also change any investment
minimum from time to time.

Purchases By Check

You may purchase shares of the Fund by mailing a check (in U.S. dollars) payable
to the Fund. Third-party checks will not be accepted.

For initial purchases, your check must be accompanied by a completed Account
Application in proper form. You should direct your check and your completed
Account Application as follows:

Regular Mail Overnight or Express Mail
------------ -------------------------
Schroder Mutual Funds Boston Financial Data Services, Inc.
P.O. Box 8507 Attn: Schroder Mutual Funds
Boston, MA 02266 66 Brooks Road
Braintree, MA 02184

Your payments should clearly indicate the shareholder's name and account number,
if applicable.

Purchases By Bank Wire/Telephone

If you make your initial investment by wire, your order must be preceded by a
completed Account Application. Upon receipt of the Application, the Trust will
assign you an account number and your account will become active. Wire orders
received prior to the close of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern Time) on each day the Exchange is open for trading will be
processed at the net asset value next determined as of the end of that day. Wire
orders received after that time will be processed at the net asset value next
determined thereafter.

<PAGE>

Once you have an account number, you may purchase Investor Shares through your
Service Organization, or directly from the Trust, by telephoning the Transfer
Agent at (800) 464-3108, to give notice that you will be sending funds by wire,
and then arranging with your bank to wire funds to the Trust. In order to
purchase shares by telephone, you must complete the appropriate section of the
Account Application. Your purchase will not be processed until the Trust has
received the wired funds.

Federal Reserve Bank wire instructions are as follows:

State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ABA No.: 011000028
Attn: Schroder Mutual Funds
DDA No.: 9904-650-0
FBO: Account Registration
A/C: Mutual Fund Account Number
Schroder Emerging Markets Fund Institutional Portfolio

The wire order must specify the name of the Fund, the share class (i.e.,
Investor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order.

In an effort to prevent unauthorized or fraudulent purchase or redemption
requests by telephone, the Transfer Agent will follow reasonable procedures to
confirm that telephone instructions are genuine. The Transfer Agent and the
Trust generally will not be liable for any losses due to unauthorized or
fraudulent purchase or redemption requests, but either or both may be liable if
they do not follow these procedures.

If six months have passed since correspondence to the shareholder's address of
record is returned, then, unless the Transfer Agent determines the shareholder's
new address, dividends and other distributions that have been returned to the
Transfer Agent will be reinvested in the Fund, and the checks will be canceled.

automatic purchases

If you purchase shares directly from the Trust and the shares are held in your
own name, you can make regular investments of $100 or more per month or quarter
in Investor Shares of the Fund through automatic deductions from your bank
account. Please complete the appropriate section of the Account Application if
you would like to utilize this option. For more information, please call the
Trust at (800) 464-3108. If you purchase shares through a Service Organization,
your firm may also provide automatic purchase options. Please contact your
Service Organization for details.

other purchase information

Investor Shares of the Fund may be purchased for cash or in exchange for
securities held by the investor, subject to the determination by Schroder that
the securities are acceptable. Investors interested in purchases through
exchange should telephone Schroder at (800) 464-3108.

Schroder reserves the right to reject any investment. A pattern of purchases and
redemptions of the Fund's shares characteristics of "market timing" strategies
may be deemed by Schroder to be detrimental to the Trust or the Fund. Currently,
the Trust limits the number of "round trip" purchases an investor may make. An
investor makes a "round trip" purchase when the investor purchases shares of the
Fund, subsequently redeems those shares, and then again purchases shares of the
Fund. If an investor completes four round trip purchases in any twelve-month
period, the Trust may to refuse any subsequent purchase order by that investor.

Schroder Fund Advisors Inc., Schroder, or their affiliates may, at their own
expense and out of their own

<PAGE>

assets, provide compensation to dealers or other intermediaries in connection
with sales of Trust shares or shareholder servicing. In some instances, this
compensation may be made available only to certain dealers or other
intermediaries who have sold or are expected to sell significant amounts of
shares of the Fund. If you purchase or sell shares through an intermediary, the
intermediary may charge a separate fee for its services. Consult your
intermediary for information.

HOW TO SELL SHARES

You may sell your Investor Shares back to the Fund on any day the New York Stock
Exchange is open, either through your Service Organization or directly to the
Fund. If your shares are held in the name of a Service Organization, you may
only sell the shares through that Service Organization. The Service Organization
may charge you for its services. If you choose to sell your shares directly to
the Fund, you may do so by sending a letter of instruction or stock power form
to the Trust, or by calling the Transfer Agent at (800) 464-3108. The price you
will receive is the net asset value next determined after receipt of your
redemption request in good order, minus a redemption charge of 0.50% of the
amount redeemed. The redemption charge, which is not a sales charge, is assessed
and retained by the Fund to compensate the other investors in the Fund for
expenses incurred in connection with sales of portfolio securities. The
redemption charge is not assessed on shares acquired through the reinvestment of
dividends or distributions or on redemptions in kind. For purposes of computing
the redemption charge, redemptions by a shareholder are deemed to be made in the
following order: (i) from Investor Shares purchased through the reinvestment of
dividends and distributions (with respect to which no redemption charge is
applied) and (ii) from Investor Shares for which the redemption charge is
applicable, on a first-purchased, first-redeemed basis.

A redemption request is in good order if it includes the exact name in which the
shares are registered, the investor's account number, and the number of shares
or the dollar amount of shares to be redeemed, and, for written requests, if it
is signed exactly in accordance with the registration form. If you hold your
Investor Shares in certificate form, you must submit the certificates and sign
the assignment form on the back of the certificates. Signatures must be
guaranteed by a bank, broker-dealer, or certain other financial institutions.
You may redeem your Investor Shares by telephone only if you elected the
telephone redemption privilege option on your Account Application or otherwise
in writing. Unless otherwise agreed by the Trust, the telephone redemption
privilege may only be exercised to redeem shares worth $1,000 or more and not
more than $25,000. Shares for which certificates have been issued may not be
redeemed by telephone. The Trust may require additional documentation from
shareholders that are corporations, partnerships, agents, fiduciaries, or
surviving joint owners, or those acting through powers of attorney or similar
delegation.

If you redeem shares through your Service Organization, your Service
Organization is responsible for ensuring that the Transfer Agent receives your
redemption request in proper form and at the appropriate time. If your Service
Organization receives Federal Reserve wires, you may instruct that your
redemption proceeds be forwarded by wire to your account with your Service
Organization; you may also instruct that your redemption proceeds be forwarded
to you by a wire transfer. Please indicate your Service Organization's or your
own complete wiring instructions. Your Service Organization may charge you
separately for this service.

The Trust will pay you for your redemptions as promptly as possible and in any
event within seven days after the request for redemption is received in writing
in good order. (The Trust generally sends payment for shares the business day
after a request is received.) Under unusual circumstances, the Trust may suspend
redemptions or postpone payment for more than seven days, as permitted by law.
If you paid for your Investor Shares by check, you will not be sent redemption
proceeds until the check you used to pay for the Investor Shares has cleared,
which may take up to 15 calendar days from the purchase date.

<PAGE>

If, because of your redemptions, your account balance falls below a minimum
amount set by the Trustees (presently $100,000) of the Fund, the Trust may
choose to redeem your shares in the Fund and pay you for them. You will receive
at least 30 days written notice before the Trust redeems your shares, and you
may purchase additional shares at any time to avoid a redemption. The Trust may
also redeem shares if you own shares of the Fund above a maximum amount set by
the Trustees. There is currently no maximum, but the Trustees may establish one
at any time, which could apply to both present and future shareholders.

The Trust may suspend the right of redemption during any period when: (1)
trading on the New York Stock Exchange is restricted or the Exchange is closed;
(2) the Securities and Exchange Commission ("SEC") has by order permitted such
suspension; or (3) an emergency (as defined by rules of the SEC) exists making
disposal of portfolio investments or determination of the Fund's net asset value
not reasonably practicable.

If you request that your redemption proceeds be sent to you at an address other
than your address of record, or to another party, you must include a signature
guarantee for each such signature by an eligible signature guarantor, such as a
member firm of a national securities exchange or a commercial bank or trust
company located in the United States. If you are a resident of a foreign
country, another type of certification may be required. Please contact the
Transfer Agent for more details at (800) 464-3108. Corporations, fiduciaries,
and other types of shareholders may be required to supply additional documents
which support their authority to effect a redemption.

DIVIDENDS AND DISTRIBUTIONS

The Fund distributes any net investment income and any net realized capital gain
at least annually. Distributions from net capital gain are made after applying
any available capital loss carryovers.

You can choose from four distribution options:

>> Reinvest all distributions in additional Investor Shares of the
Fund;

>> Receive distributions from net investment income in cash while
reinvesting capital gain distributions in additional Investor Shares
of the Fund;

>> Receive distributions from net investment income in additional
Investor Shares of the Fund while receiving capital gain
distributions in cash; or

>> Receive all distributions in cash.

You can change your distribution option by notifying the Transfer Agent in
writing. If you do not select an option when you open your account, all
distributions by the Fund will be reinvested in Investor Shares of the Fund. You
will receive a statement confirming reinvestment of distributions in additional
Fund shares promptly following the period in which the reinvestment occurs.

TAXES

<PAGE>

from investments that the Fund owned for more than 12 months will be taxable as
long-term capital gains. Distributions of gains from investments that the Fund
owned for 12 months or less will be taxable as ordinary income. Distributions
are taxable whether you received them in cash or reinvested them in additional
shares of the Fund.

Taxes when you sell your shares. Any gain resulting from the sale of your shares
in the Fund will also generally be subject to federal income tax at either
short-term or long-term capital gain rates depending on how long you have owned
your shares.

Foreign taxes. Foreign governments may impose taxes on the Fund and its
investments, which generally would reduce the Fund's income. However, an
offsetting tax credit or deduction may be available to shareholders.

The Fund, provided that it is eligible to do so, intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of foreign
income taxes paid by the Fund. If the Fund does make such an election, its
shareholders would include as gross income in their U.S. federal income tax
returns both (1) distributions received from the Fund and (2) the amount that
the Fund advises is their pro rata portion of foreign income taxes paid with
respect to or withheld from dividends and interest paid to the Fund from its
foreign investments. Shareholders then would be entitled, subject to certain
limitations (including, with respect to a foreign tax credit, a holding period
requirement), to take a foreign tax credit against their U.S. federal income tax
liability for the amount of such foreign taxes or else to deduct such foreign
taxes as an itemized deduction from gross income.

Consult your tax advisor about other possible tax consequences. This is a
summary of certain federal tax consequences of investing in the Fund. You should
consult your tax advisor for more information on your own tax situation,
including possible state and local tax liability.
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table on the following page is intended to help you
understand the financial performance of the Fund since the Fund commenced
operations. Certain information reflects financial results for a single Fund
share. The total returns represent the total return for an investment in
Investor Shares of the Fund, assuming reinvestment of all dividends and
distributions. The financial highlights presented below have been audited by
PricewaterhouseCoopers LLP, independent accountants to the Fund. The audited
financial statements for the Fund and the related independent accountants'
report are contained in the Fund's Annual Report and are incorporated by
reference into the Statement of Additional Information. Copies of the Fund's
Annual Report may be obtained without charge by writing the Trust at P.O. Box
8507, Boston, Massachusetts 02266 (regular mail), or at 66 Brooks Drive,
Braintree, Massachusetts 02184 (overnight or express mail), or by calling (800)
464-3108.

<PAGE>

Schroder Emerging Markets Fund Institutional Portfolio - Investor Shares

(For an Investor Share outstanding throughout the period.)

<TABLE>
<CAPTION>
For the Year Ended October 31, For the Period
------------------------------------------------------ Ended
October 31,
-----------
1999 1998 1997 1996 1995(1)
----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period........... $7.77 $11.08 $11.06 $10.63 $10.00
----- ------ ------ ------ ------
Income from Investment Operations: (2)
Net Investment Income ........................ 0.06 0.12 0.06 0.02 0.02
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency...... 2.75 (3.39) (0.03) 0.43 0.61
---- ------ ------ ---- ----
Total from Investment Operations.............. 2.81 (3.27) 0.03 0.45 0.63
---- ------ ---- ---- ----
Less Distributions:
From Net Investment Income.................... (0.05) (0.04) (0.01) (0.02) 0.00
------ ------ ------ ------ ----
Total Distributions........................... (0.05) (0.04) (0.01) (0.02) 0.00
------ ------ ------ ------ ----
Net Asset Value at End of Period................. $10.53 $7.77 $11.08 $11.06 $10.63
====== ===== ====== ====== ======

Total Return (3)................................. 36.27% (29.64)% 0.27% 4.22% 6.30%
Ratios & Supplementary Data
Net Assets at End of Period (in thousands).... $212,859 $111,463 $179,436 $167,570 $18,423
Ratios to Average Net Assets: (2)
Expenses including reimbursement/
waiver of fees......................... 1.27% 1.36% 1.41% 1.60% 1.58%(4)
Expenses excluding reimbursement/
waiver of fees......................... 1.33% 1.64% 1.62% 1.71% 2.45%(4)
Net investment income including
Reimbursement/waiver of fees........... 0.85% 1.11% 0.51% 0.36% 0.46%(4)
Portfolio Turnover Rate (5)................... 77% 67% 43% 103% 44%
</TABLE>

(1) For the period March 31, 1995 (Commencement of Operations) through October
31, 1995. The Fund converted to a master/feeder structure on November 1,
1995.

(2) From November 1, 1995 to May 31, 1999, the Fund recognized its
proportionate share of income, expenses and gains/losses of the underlying
portfolio, Schroder Emerging Markets Fund Institutional Portfolio
(Portfolio). Commencing June 1, 1999, income, expenses and gains/losses
were directly accrued to the Fund.

(3) Total return calculation do not reflect the payment of purchase or
redemption fees of 0.50%, respectively. Total returns would have been
lower had certain Fund expenses not been limited during the periods shown.
(See Note 3 to the Fund's financial statements). Total return calculations
for a period of less than one year are not annualized.

(4) Annualized.

(5) The portfolio turnover rates for the years after October 31, 1995 through
October 31, 1998 represent the turnover of the underlying portfolio,
Schroder Emerging Markets Fund Institutional Portfolio (Portfolio). For
the year ended October 31, 1999, the rate represents a combination of the
portfolio turnover rate of the Portfolio for the period from November 1,
1998 through May 31, 1999, during which time the Fund invested in the
Portfolio, and the portfolio turnover rate of the Fund for the period June
1, 1999 through October 31, 1999, during which time the Fund held direct
investments in a portfolio of securities.
<PAGE>

================================================================================

FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.

Please call (800) 464-3108 for complete information and
to obtain the relevant prospectus.

Please read the prospectus carefully before you invest.

Schroder Capital Funds (Delaware) Schroder Series Trust
Schroder International Fund Schroder Large Capitalization Equity Fund
Schroder Emerging Markets Fund Schroder Small Capitalization Value Fund
Schroder International Smaller
Companies Fund Schroder MidCap Value Fund
Schroder Greater China Fund Schroder Investment Grade Income Fund
Schroder U.S. Diversified Growth Fund Schroder Short-Term Investment Fund
Schroder U.S. Smaller Companies Fund
Schroder Micro Cap Fund

Schroder Series Trust II
Schroder All-Asia Fund

================================================================================
<PAGE>

Investment Adviser

Schroder Investment Management North America Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019

Administrator and Distributor

Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019

Subadministrator and Custodian

State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Transfer and Dividend Disbursing Agent

Boston Financial Data Services, Inc.
66 Brooks Drive
Braintree, Massachusetts 02184
(800) 464-3108

Counsel

Ropes & Gray
One International Place
Boston, Massachusetts 02110

Independent Accountants

PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109

================================================================================

SCHRODER CAPITAL FUNDS (DELAWARE)

Schroder Emerging Markets Fund Institutional Portfolio

The Fund's statement of additional information (SAI) and annual and semi-annual
reports to shareholders include additional information about the Fund. The SAI
and the financial statements included in the Fund's most recent annual report to
shareholders are incorporated by reference into this Prospectus, which means
they are part of this Prospectus for legal purposes. The Fund's annual report
discusses the market conditions and investment strategies that significantly
affected the Fund's performance during its

<PAGE>

last fiscal year. You may get free copies of these materials, request other
information about the Trust and the Fund, or make shareholder inquiries by
calling (800-464-3108).

You may review and copy information about the Fund, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at (800-SEC-0330) for information about the
operation of the public reference room. You may also access reports and other
information about the Trust and the Fund on the Commission's Internet site at
www.sec.gov. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-1911.

Schroder Capital Funds (Delaware)
P.O. Box 8507
Boston, MA 02266
800-464-3108

File No. 811-1911
<PAGE>

Schroders

PROSPECTUS

March 1, 2000

Schroder Capital Funds (Delaware)

Schroder Emerging Markets Fund Institutional Portfolio

Advisor Shares

Schroder Investment Management North America Inc. ("Schroder") manages the Fund.
You can call the Trust at (800) 464-3108 to find out more about the Fund and
other funds in the Schroder family.

This Prospectus explains what you should know about the Fund before you invest.
Please read it carefully.

<PAGE>

TABLE OF CONTENTS

Page
----

SUMMARY INFORMATION..........................................................1

FEES AND EXPENSES............................................................4

OTHER INVESTMENT STRATEGIES AND RISKS........................................5

MANAGEMENT OF THE FUND.......................................................9

HOW THE FUND'S SHARES ARE PRICED............................................11

HOW TO BUY SHARES...........................................................11

HOW TO SELL SHARES..........................................................14

ADDITIONAL INFORMATION ABOUT ADVISOR SHARES.................................15

DIVIDENDS AND DISTRIBUTIONS.................................................15

TAXES.......................................................................16

FINANCIAL HIGHLIGHTS........................................................17
<PAGE>

SUMMARY INFORMATION

The summary for the Fund includes a bar chart that shows how the investment
returns of the Fund's Advisor Shares have varied from year to year. The bar
chart shows returns for each full calendar year since the Fund has had Advisor
Shares outstanding. The table following the bar chart shows how the Fund's
average annual returns for the last year and since inception of the Advisor
Shares compare to a broad-based securities market index. Advisor Shares have not
been outstanding for the full life of the Fund; the bar chart and table reflect
the Fund's performance only for the periods when Advisor Shares were
outstanding. The bar chart and table provide some indication of the risks of
investing in the Fund by showing the variability of its returns and by comparing
the Fund's performance to a broad measure of market performance. Past
performance is not necessarily an indication of future performance. It is
possible to lose money on an investment in the Fund.

The Fund also may do the following:

>> Invest in securities of closed-end investment companies that
invest primarily in foreign securities, including securities
of emerging market issuers.

>> Invest up to 35% of its assets in debt securities, including
lower-quality, high yielding debt securities (commonly known
as "junk bonds"), which entail certain risks.
<PAGE>

o Principal Risks.

>> Emerging Markets. The Fund may invest in "emerging market" countries
whose securities markets may experience heightened levels of
volatility. The risks of investing in emerging markets include
greater political and economic uncertainties than in foreign
developed markets, currency transfer restrictions, a more limited
number of potential buyers, and an emerging market country's
dependence on revenue from particular commodities or international
aid. Additionally, the securities markets and legal systems in
emerging market countries may only be in a developmental stage and
may provide few, or none, of the advantages or protections of
markets or legal systems available in more developed countries.
Emerging market countries may experience extremely high levels of
inflation, which may adversely affect those countries' economies,
currencies, and securities markets. Also, emerging market issuers
are often smaller and less well-known than larger, more widely held
companies and involve certain special risks associated with smaller
capitalization companies.

>> Geographic Concentration. There is no limit on the amount of the
Fund's assets that may be invested in securities of issuers
domiciled in any one country, although the Fund will normally invest
in at least three countries other than the United States. To the
extent that the Fund invests a substantial amount of its assets in
one country, it will be more susceptible to the political and
economic developments and market fluctuations in that country than
if it invested in a more geographically diversified portfolio.

>> Non-Diversified Mutual Fund. The Fund is a "non-diversified" mutual
fund, and will invest its assets in a more limited number of issuers
than may diversified investment companies. To the extent the Fund
focuses on fewer issuers, its risk of loss increases if the market
value of a security declines or if an issuer is not able to meet its
obligations.

>> Equity Securities. Another risk of investing in the Fund is the risk
that the value of the equity securities in the portfolio will fall,
or will not appreciate as anticipated by Schroder, due to factors
that adversely affect markets generally or particular companies in
the portfolio.

>> Debt Securities. The Fund may invest in debt securities, which are
subject to market risk (the fluctuation of market value in response
to changes in interest rates) and to credit risk (the risk that the
issuer may become unable or unwilling to make timely payments of
principal and interest).

>> Junk Bonds. Securities rated below investment grade ("junk bonds")
lack outstanding investment characteristics and have speculative
characteristics and are subject to greater credit and market risks
than higher-rated securities. The lower ratings of junk bonds
reflect a greater possibility that adverse changes in the financial
condition of the issuer or in general economic conditions, or an
unanticipated rise in interest rates, may impair the ability of the
issuer to make payments of interest and principal. If this were to
occur, the values of securities held by the Fund may become more
volatile.

<PAGE>

[The following was depicted as a bar chart in the original printed material.]

Calendar Year End
--------------------------
1997 1998 1999
---- ---- ----
Annual Return -5.41% -25.46% 62.32%

Schroder Emerging Markets Fund Institutional Portfolio

Advisor Shares

During the periods shown above, the highest quarterly return was 27.27 % for the
quarter ended December 31, 1999, and the lowest was -22.09% for the quarter
ended September 30, 1998.

- --------------------------------------------------------------------------------
Average Annual Total Returns* Since Inception
(for periods ending December of Advisor Shares
31, 999) One Year (11/21/96)
- --------------------------------------------------------------------------------
Schroder Emerging Markets 60.77% 9.27%
Fund Institutional Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley Capital 66.41% 3.79%
International Emerging
Markets Free Index**
- --------------------------------------------------------------------------------

<PAGE>

* Unlike the bar chart, the Fund's average annual total returns shown in the
table above reflect the impact of a 0.50% purchase charge at the time of
purchase and a 0.50% redemption charge deducted at the end of each period.
The Index to which the Fund's average annual returns are compared do not
reflect the imposition of such charges.

** The Morgan Stanley Capital International Emerging Markets Free Index is an
unmanaged, market capitalization index of companies representative of the
market structure of 25 emerging countries in Europe, Latin America, and
the Pacific Basin. The Index represents actual buyable opportunities for
the non-domestic investor by taking into account local market restrictions
on share ownership by foreigners. For periods prior to November 30, 1998,
returns represent the MSCI EMF Index (ex-Malaysia).

<PAGE>

FEES AND EXPENSES

These tables describe the fees and expenses that you may pay if you buy and hold
Advisor Shares of the Fund.

Shareholder Fees
(paid directly from your investment):
Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Purchase Charge (based on amount invested)(1) 0.50%
Redemption Charge (as a percentage of the net asset value
of shares redeemed)(1) 0.50%

Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):
Management Fees(2) 1.10%
Distribution (12b-1) Fees(3) None
Other Expenses (includes a 0.25% 0.50%
shareholder servicing fee)(3)
Total Annual Fund Operating Expenses 1.60%
Fee Waiver and/or Expense Limitation(4) 0.17%
Net Expenses(4) 1.43%

(2) Management Fees include all fees payable to Schroder and its affiliates for
investment advisory and fund administration services.

(3) The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, with respect to its Advisor Shares.
Under the Plan, the Fund may pay Schroder Fund Advisors Inc. compensation in an
amount limited in any fiscal year to the annual rate of 0.50% of the Fund's
average daily net assets attributable to its Adviser Shares. Although the
Trustees have not currently authorized payments under the Distribution Plan,
payments by the Fund under its Shareholder Servicing Plan, which will not exceed
the annual rate of 0.25% of the Fund's average daily net assets attributable to
its Advisor Shares, will be deemed to have been made pursuant to the
Distribution Plan to the extent such payments may be considered to be primarily
intended to result in the sale of the Fund's Advisor Shares.

(4) The Net Expenses shown above reflect the effect of contractually imposed
expense limitations and/or fee waivers, in effect through October 31, 2000, on
the Total Annual Fund Operating Expenses of the Fund.

Example

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in Advisor Shares of the Fund for
the time periods indicated and either retain all of your shares or redeem all of
your shares at the end of those periods. The Example assumes that you pay a
0.50% Purchase Charge at the time of purchase and a 0.50% Redemption Charge at
the time of redemption. The Example also assumes that your investment earns a 5%
return each year and that the Fund's Total Annual Fund Operating Expenses remain
the same as those set forth above (absent the noted Fee Waiver and/or Expense
Limitation). Your actual costs may be higher or lower. Based on these
assumptions, your costs would be:

1 year 3 years 5 years 10 years
------ ------- ------- --------

Assuming no redemption* ........ $ 214 $ 557 $ 923 $1,952
Assuming full redemption
at end of period* ........... $ 265 $ 611 $ 982 $2,022
------

- ----------
* Assuming that the Fund's operating expenses remain the same as Net Expenses
set forth above, based on the other assumptions described above, your costs
would be as follows for 1 year, 3 years, 5 years, and 10 years, respectively:
$196, $504, $833, and $1,764 (assuming no redemption) or $248, $559, $892 and
$1,834 (assuming full redemption at end of period).

<PAGE>

OTHER INVESTMENT STRATEGIES AND RISKS

Risks of Investing in the Fund

more volatile than securities of comparable U.S. issuers. Foreign
brokerage commissions and other fees are also generally higher than
in the United States. Foreign settlement procedures and trade
regulations may involve certain risks (such as delay in payment or
delivery of securities or in the recovery of the Fund's assets held
abroad) and expenses not present in the settlement of domestic
investments.

>> Debt Securities. The Fund may invest in debt securities, which are
subject to the risk of fluctuation of market value in response to
changes in interest rates and the risk that the issuer may default
on the timely payment of principal and interest. Additionally, the
Fund may invest in junk bonds, which are lower-quality,
high-yielding debt securities rated below Baa or BBB by Moody's
Investors Service, Inc. or Standard & Poor's

<PAGE>

Ratings Services (or, if they are unrated, determined by Schroder to
be of comparable quality). See the Statement of Additional
Information for further descriptions of securities ratings assigned
by Moody's and Standard & Poor's. Lower-rated debt securities are
predominantly speculative and tend to be more susceptible than other
debt securities to adverse changes in the financial condition of the
issuer, general economic conditions, or an unanticipated rise in
interest rates, which may affect an issuer's ability to pay interest
and principal. This would likely make the values of the securities
held by the Fund more volatile and could limit the Fund's ability to
liquidate its securities. Changes by recognized rating services in
their ratings of any fixed-income security and in the perceived
ability of an issuer to make payments of interest and principal also
may affect the value of these investments.

OTHER INVESTMENT STRATEGIES AND TECHNIQUES

In addition to the principal investment strategies described in the Summary
Information section above, the Fund may at times use the strategies and
techniques described below, which involves certain special risks. This
Prospectus does not attempt to disclose all of the various investment techniques
and types of securities that Schroder might use in managing the Fund. As in any
mutual fund, investors must rely on the professional investment judgment and
skill of the Fund's adviser.

>> Foreign Currency Exchange Transactions. Changes in currency exchange
rates will affect the U.S. dollar value of Fund assets, including
securities denominated in foreign currencies. Exchange rates between
the U.S. dollar and other currencies fluctuate in response to forces
of supply and demand in the foreign exchange markets. These forces
are affected by the international balance of payments and other
political, economic, and financial conditions, which may be
difficult to predict. The Fund may engage in currency exchange
transactions to protect against unfavorable fluctuations in exchange
rates.
<PAGE>

>> Investment in Other Investment Companies. The Fund may invest in
other investment companies or pooled vehicles, including closed-end
funds that are advised by Schroder or its affiliates or by
unaffiliated parties. When investing in another investment company,
the Fund may pay a premium above such investment company's net asset
value per share. As a shareholder in an investment company, the Fund
would bear its ratable share of the investment company's expenses,
including advisory and administrative fees, and would at the same
time continue to pay its own fees and expenses.

<PAGE>

transactions, and to increase total return. These may include
options, futures, and indices, for example. Derivatives involve the
risk that they may not work as intended due to unanticipated
developments in market conditions or other causes. Also, derivatives
often involve the risk that the other party to the transaction will
be unable to close out the position at any particular time or at an
acceptable price.

MANAGEMENT OF THE FUND

<PAGE>

management of approximately $208 billion. In January 2000, Schroders plc
agreed to sell its worldwide investment banking business to Salomon Smith
Barney. The transaction, which is expected to be completed by May 2000, is
subject to regulatory approvals and satisfaction of closing conditions.
Schroders plc will retain its asset management business.

>> Expense Limitations and Waivers. In order to limit the Fund's
expenses, Schroder is contractually obligated to reduce its
compensation (and, if necessary, to pay certain other Fund expenses)
until October 31, 2000 to the extent that the Fund's total operating
expenses attributable to its Advisor Shares exceed the annual rate
of 1.43%. Prior to June 1, 1999, Schroder observed an expense
limitation for the Fund's Advisor Shares at the annual rate of
1.70%. In addition, Schroder and its affiliates have voluntarily
undertaken, until further notice, to limit their fees or to pay a
portion of the expenses incurred by the Fund in respect of its
Advisor Shares so that the Net Expenses of the Fund's Advisor Shares
will not exceed the Net Expenses of the Fund's Investor Shares by
more than 0.25%.

<TABLE>
<CAPTION>
Portfolio Manager Since Recent Professional
- ----------------- ----- Experience
----------
<S> <C> <C>
John Troiano Inception (1995) Employed as an investment professional
at Schroder since 1986. Mr. Troiano is
the Chief Executive and a Director of
Schroder, and a Vice President of the
Trust, Schroder Capital Funds, and
Schroder Series Trust.

Heather Crighton Inception (1995) Employed as an investment professional
at Schroder since 1993. Ms. Crighton
is a Director and Senior Vice
President of Schroder.
</TABLE>
<PAGE>

<TABLE>
<S> <C> <C>
Mark Bridgeman Inception (1995) Employed as an investment professional
at Schroder since 1990. Mr. Bridgeman
is a First Vice President of Schroder.
</TABLE>

HOW THE FUND'S SHARES ARE PRICED

The Fumd calculates the net asset value of its Advisor Shares by dividing the
total value of its assets attributable to its Advisor Shares, less its
liabilities attributable to those shares, by the number of Advisor Shares
outstanding. Shares are valued as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern Time) each day the Exchange is open. The
Trust expects that days, other than weekend days, that the Exchange will not be
open are New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. The Fund values its portfolio securities for which market
quotations are readily available at market value. Short-term investments that
will mature in 60 days or less are stated at amortized cost, which approximates
market value. The Fund values securities and assets for which market values are
not ascertainable at their fair values as determined in accordance with
procedures adopted by the Board of Trustees. All assets and liabilities of the
Fund denominated in foreign currencies are translated into U.S. dollars based on
the mid-market price of such currencies against the U.S. dollar at the time when
last quoted. Because certain of the securities in which the Fund may invest may
trade on days when the Fund does not price its Advisor Shares, the net asset
value of the Fund's Advisor Shares may change on days when shareholders will not
be able to purchase or redeem their Advisor Shares. The net asset value of the
Fund's Advisor Shares will generally differ from that of its Investor Shares due
to the variance in dividends paid on each class of shares and differences in the
expenses of Advisor Shares and Investor Shares.

HOW TO BUY SHARES

You may purchase Advisor Shares of the Fund directly from the Trust (through
Schroder Fund Advisors Inc., the distributor of the Trust's shares), or through
a service organization such as a bank, trust company, broker-dealer, or other
financial organization (a "Service Organization") having an arrangement with
Schroder Fund Advisors Inc. If you do not have a Service Organization, Schroder
Fund Advisors Inc. can provide you with a list of available firms. Your Service
Organization is responsible for forwarding all of the necessary documentation to
the Trust, and may charge you separately for its services.

Advisor Shares of the Fund are sold at their net asset value next determined
after the Trust receives your order, plus a purchase charge of 0.50% of the
amount invested. The purchase charge, which is not a sales charge, is assessed
and retained by the Fund to compensate other investors in the Fund for expenses
incurred in purchasing securities due to an investment in the Fund. The purchase
charge is not assessed on the reinvestment of dividends or distributions or on
purchases through an in-kind subscription. In order for you to receive the
Fund's next determined net asset value, the Trust must receive your order before
the close of regular trading on the New York Stock Exchange.

If the Advisor Shares you purchase will be held in your own name (rather than in
the name of your Service Organization), your payment for the shares must be
accompanied by a completed Account Application in proper form. The Trust or the
Trust's Transfer Agent, Boston Financial Data Services,

<PAGE>

Inc. may request and delay acceptance of your order pending receipt of
additional documentation, such as copies of corporate resolutions and
instruments of authority, from corporations, administrators, executors, personal
representatives, directors, or custodians. You may obtain Account Applications
from the Transfer Agent at the addresses listed below under "Purchases by
Check", by calling the Trust at (800) 464-3108, or from your Service
Organization.

Investment Minimums

The minimum investments for initial and additional purchases of Advisor Shares
of the Fund are as follows:

Initial Additional
Investment Investments
---------- -----------

Regular Accounts $1,000,000 No minimum

The Trust may, in its sole discretion, accept smaller initial or subsequent
investments. The Trust does not issue share certificates.

You also may meet the minimum initial investment requirement based on cumulative
purchases by means of a written Statement of Intention, expressing your
intention to invest at least the minimum investment amount applicable to the
Fund, or more, in Advisor Shares within 13 months. You may enter into a
Statement of Intention in conjunction with your initial investment in Advisor
Shares by completing the appropriate section of the Account Application. Current
Fund shareholders can obtain a Statement of Intention form by contacting the
Transfer Agent. The Trust reserves the right to redeem your shares in the Fund
if you do not invest at least the minimum initial investment amount applicable
to your account by the end of the Statement of Intention period (taking into
account amounts you redeem during the period).

The Trust is authorized to reject any purchase order and to suspend the offering
of its shares for any period of time. The Trust may also change any investment
minimum from time to time.

Purchases By Check

You may purchase shares of the Fund by mailing a check (in U.S. dollars) payable
to the Fund. Third-party checks will not be accepted.

For initial purchases, your check must be accompanied by a completed Account
Application in proper form. You should direct your check and your completed
Account Application as follows:

Regular Mail Overnight or Express Mail
------------ -------------------------

Schroder Mutual Funds Boston Financial Data Services, Inc.
P.O. Box 8507 Attn: Schroder Mutual Funds
Boston, MA 02266 66 Brooks Road
Braintree, MA 02184

Your payments should clearly indicate the shareholder's name and account number,
if applicable.

<PAGE>

Purchases By Bank Wire/Telephone

Once you have an account number, you may purchase Advisor Shares through your
Service Organization, or directly from the Trust, by telephoning the Transfer
Agent at (800) 464-3108, to give notice that you will be sending funds by wire,
and then arranging with your bank to wire funds to the Trust. In order to
purchase shares by telephone, you must complete the appropriate section of the
Account Application. Your purchase will not be processed until the Trust has
received the wired funds.

Federal Reserve Bank wire instructions are as follows:

The wire order must specify the name of the Fund, the share class (i.e., Advisor
Shares), the account name and number, address, confirmation number, amount to be
wired, name of the wiring bank, and name and telephone number of the person to
be contacted in connection with the order.

automatic purchases

If you purchase shares directly from the Trust and the shares are held in your
own name, you can make regular investments of $100 or more per month or quarter
in Advisor Shares of the Fund through automatic deductions from your bank
account. Please complete the appropriate section of the Account Application if
you would like to utilize this option. For more information, please call the
Trust at (800) 464-3108. If you purchase shares through a Service Organization,
your firm may also provide automatic purchase options. Please contact your
Service Organization for details.

other purchase information

Advisor Shares of the Fund may be purchased for cash or in exchange for
securities held by the investor, subject to the determination by Schroder that
the securities are acceptable. Investors interested in purchases through
exchange should telephone Schroder at (800) 464-3108.

<PAGE>

Schroder reserves the right to reject any investment. A pattern of purchases and
redemptions of the Fund's shares characteristics of "market timing" strategies
may be deemed by Schroder to be detrimental to the Trust or the Fund. Currently,
the Trust limits the number of "round trip" purchases an investor may make. An
investor makes a "round trip" purchase when the investor purchases shares of the
Fund, subsequently redeems those shares, and then again purchases shares of the
Fund. If an investor completes four round trip purchases in any twelve-month
period, the Trust may refuse any subsequent purchase order by that investor.

Schroder Fund Advisors Inc., Schroder, or their affiliates may, at their own
expense and out of their own assets, provide compensation to dealers or other
intermediaries in connection with sales of Trust shares or shareholder
servicing. In some instances, this compensation may be made available only to
certain dealers or other intermediaries who have sold or are expected to sell
significant amounts of shares of the Trust. If you purchase or sell shares
through an intermediary, the intermediary may charge a separate fee for its
services. Consult your intermediary for information.

HOW TO SELL SHARES

You may sell your Advisor Shares back to the Fund on any day the New York Stock
Exchange is open, either through your Service Organization or directly to the
Fund. If your shares are held in the name of a Service Organization, you may
only sell the shares through that Service Organization. The Service Organization
may charge you for its services. If you choose to sell your shares directly to
the Fund, you may do so by sending a letter of instruction or stock power form
to the Trust, or by calling the Transfer Agent at (800) 464-3108. The price you
will receive is the net asset value next determined after receipt of your
redemption request in good order, minus a redemption charge of 0.50% of the
amount redeemed. The redemption charge, which is not a sales charge, is assessed
and retained by the Fund to compensate the other investors in the Fund for
expenses incurred in connection with sales of portfolio securities. The
redemption charge is not assessed on shares acquired through the reinvestment of
dividends or distributions or on redemptions in kind. For purposes of computing
the redemption charge, redemptions by a shareholder are deemed to be made in the
following order: (i) from Advisor Shares purchased through the reinvestment of
dividends and distributions (with respect to which no redemption charge is
applied) and (ii) from Advisor Shares for which the redemption charge is
applicable, on a first-purchased, first-redeemed basis.

A redemption request is in good order if it includes the exact name in which the
shares are registered, the investor's account number, and the number of shares
or the dollar amount of shares to be redeemed, and, for written requests, if it
is signed exactly in accordance with the registration form. If you hold your
Advisor Shares in certificate form, you must submit the certificates and sign
the assignment form on the back of the certificates. Signatures must be
guaranteed by a bank, broker-dealer, or certain other financial institutions.
You may redeem your Advisor Shares by telephone only if you elected the
telephone redemption privilege option on your Account Application or otherwise
in writing. Unless otherwise agreed by the Trust, the telephone redemption
privilege may only be exercised to redeem shares worth $1,000 or more and not
more than $25,000. Shares for which certificates have been issued may not be
redeemed by telephone. The Trust may require additional documentation from
shareholders that are corporations, partnerships, agents, fiduciaries, or
surviving joint owners, or those acting through powers of attorney or similar
delegation.

<PAGE>

Organization's or your own complete wiring instructions. Your Service
Organization may charge you separately for this service.

The Trust will pay you for your redemptions as promptly as possible and in any
event within seven days after the request for redemption is received in writing
in good order. (The Trust generally sends payment for shares the business day
after a request is received.) Under unusual circumstances, the Trust may suspend
redemptions or postpone payment for more than seven days, as permitted by law.
If you paid for your Advisor Shares by check, you will not be sent redemption
proceeds until the check you used to pay for the Advisor Shares has cleared,
which may take up to 15 calendar days from the purchase date.

ADDITIONAL INFORMATION ABOUT ADVISOR SHARES

Shareholder Servicing Plan. The Trust has adopted a Shareholder Servicing Plan
(the "Service Plan") for the Advisor Shares of the Fund. Under the Service Plan,
the Fund pays fees to Schroder Fund Advisors Inc. at an annual rate of up to
0.25% of the average daily net assets of the Fund represented by Advisor Shares.
Schroder Fund Advisors Inc. may enter into shareholder service agreements with
Service Organizations pursuant to which the Service Organizations provide
administrative support services to their customers who are Fund shareholders. In
return for providing these support services, a Service Organization may receive
payments from Schroder Fund Advisors Inc. at a rate not exceeding 0.25% of the
average daily net assets of the Advisor Shares of the Fund for which the Service
Organization is the Service Organization of record. Some Service Organizations
may impose additional conditions or fees. For instance, a Service Organization
may require its clients to invest more than the minimum amounts required by the
Trust for initial or subsequent investments or may charge a direct fee for its
services. These fees would be in addition to any amounts which you pay as a
shareholder of the Fund or amounts which might be paid to the Service
Organization by Schroder Fund Advisors Inc. Please contact your Service
Organization for details. Schroder intends that payments made under the Service
Plan be used for administrative support services, and not for distribution of
the Fund's Advisor Shares.

<PAGE>

Distribution Plan. The Fund has adopted a Distribution Plan which allows the
Fund to pay distribution fees for the sale and distribution of its Advisor
Shares. Under the Plan, the Fund may pay Schroder Fund Advisors Inc.
compensation in an amount limited in any fiscal year to the annual rate of 0.50%
of the Fund's average daily net assets attributable to its Advisor Shares. The
Trustees have not currently authorized payments under the Distribution Plan,
although payments by the Fund under the Service Plan will be deemed to have been
made pursuant to the Distribution Plan to the extent such payments may be
considered to be primarily intended to result in the sale of the Fund's Advisor
Shares. To the extent that payments are made in the future under any
distribution plan, they would be paid out of the Fund's assets attributable to
its Advisor Shares on an ongoing basis, would increase the cost of your
investment, and, in the long run, may cost you more than paying other types of
sales charges imposed by other funds.

DIVIDENDS AND DISTRIBUTIONS

The Fund distributes any net investment income and any net realized capital gain
at least annually. Distributions from net capital gain are made after applying
any available capital loss carryovers.

You can choose from four distribution options:

>> Reinvest all distributions in additional Advisor Shares of the Fund;

>> Receive distributions from net investment income in cash while
reinvesting capital gain distributions in additional Advisor Shares
of the Fund;

>> Receive distributions from net investment income in additional
Advisor Shares of the Fund while receiving capital gain
distributions in cash; or

>> Receive all distributions in cash.

You can change your distribution option by notifying the Transfer Agent in
writing. If you do not select an option when you open your account, all
distributions by the Fund will be reinvested in Advisor Shares of the Fund. You
will receive a statement confirming reinvestment of distributions in additional
Fund shares promptly following the period in which the reinvestment occurs.

TAXES

Taxes on dividends and distributions. For federal income tax purposes,
distributions of investment income are taxable as ordinary income. Taxes on
distributions of capital gains are determined by how long the Fund owned the
investments that generated the gains, rather than how long you have owned your
shares. Distributions are taxable to you even if they are paid from income or
gains earned by the Fund before you invested (and thus were included in the
price you paid for your shares). Distributions of gains from investments that
the Fund owned for more than 12 months will be taxable as long-term capital
gains. Distributions of gains from investments that the Fund owned for 12 months
or less will be taxable as ordinary income. Distributions are taxable whether
you received them in cash or reinvested them in additional shares of the Fund.

The Fund, provided that it is eligible to do so, intends to elect to permit its
shareholders to take a credit

<PAGE>

(or a deduction) for the Fund's share of foreign income taxes paid by the Fund.
If the Fund does make such an election, its shareholders would include as gross
income in their U.S. federal income tax returns both (1) distributions received
from the Fund and (2) the amount that the Fund advises is their pro rata portion
of foreign income taxes paid with respect to or withheld from dividends and
interest paid to the Fund from its foreign investments. Shareholders then would
be entitled, subject to certain limitations (including, with respect to a
foreign tax credit, a holding period requirement), to take a foreign tax credit
against their U.S. federal income tax liability for the amount of such foreign
taxes or else to deduct such foreign taxes as an itemized deduction from gross
income.

FINANCIAL HIGHLIGHTS

The financial highlights table on the following page is intended to help you
understand the financial performance of the Fund since the initial offering date
of the Fund's Advisor shares. Certain information reflects financial results for
a single Fund share. The total returns represent the total return for an
investment in Advisor Shares of the Fund, assuming reinvestment of all dividends
and distributions. The financial highlights presented below have been audited by
PricewaterhouseCoopers LLP, independent accountants to the Fund. The audited
financial statements for the Fund and the related independent accountants'
report are contained in the Fund's Annual Report and are incorporated by
reference into the Statement of Additional Information. Copies of the Fund's
Annual Report may be obtained without charge by writing the Trust at P.O. Box
8507, Boston, Massachusetts 02266 (regular mail), or at 66 Brooks Drive,
Braintree, Massachusetts 02184 (overnight or express mail), or by calling (800)
464-3108.

<PAGE>

Schroder Emerging Markets Fund Institutional Portfolio - Advisor Shares

(For an Advisor Share outstanding throughout the period.)

<TABLE>
<CAPTION>
For the Year Ended October 31, October 31,
------------------------------ -----------
1999 1998 1997(1)
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value at Beginning of
Period ............................ $ 7.79 $ 11.11 $ 11.28
---------- ---------- ----------
Income from Investment
Operations:(2)
Net Investment Income ........... 0.05 0.08 0.03
Net Realized and Unrealized Gain
(Loss) on Investments and Foreign
Currency ....................... 2.75 (3.39) (0.19)
---------- ---------- ----------
Total from Investment Operations 2.80 (3.31) (0.16)
---------- ---------- ----------
Less Distributions:
From Net Investment Income ...... (0.01) (0.01) (0.01)
---------- ---------- ----------
Total Distributions ............. (0.01) (0.01) (0.01)
---------- ---------- ----------

Net Asset Value at End of Period .. $ 10.58 $ 7.79 $ 11.11
========== ========== ==========
Total Return (3) .................. 36.05% (29.81)% (1.42)%
Ratios & Supplementary Data
Net Assets at End of Period (in
thousands) ..................... $ 35,637 $ 20,472 $ 25,280
Ratios to Average Net Assets: (2)
Expenses including
reimbursement/waiver of fees . 1.52% 1.61% 1.66%(4)
Expenses excluding
reimbursement/waiver of fees . 1.60% 1.97% 2.03%(4)
Net investment income
including reimbursement/waiver
of fees....................... 0.70% 0.82% 0.27%(4)
Portfolio Turnover Rate(5) ...... 77% 67% 43%(6)
</TABLE>

(1) Advisor Shares were first issued on November 21, 1996.

(2) Prior to June 1, 1999, the Fund recognized its proportionate share of
income, expenses and gains/losses of the underlying portfolio, Schroder
Emerging Markets Fund Institutional Portfolio (Portfolio). Commencing June
1, 1999, income, expenses and gains/losses were directly accrued to the
Fund.

(3) Total return calculations do not reflect the payment of purchase or
redemption fees of 0.50%, respectively. Total returns would have been
lower had certain expenses not been reduced during the periods shown. (See
Note 3 to the Fund's financial statements). Total return calculations for
a period of less than one year are not annualized.

(4) Annualized.

(5) The portfolio turnover rates for the periods through October 31, 1998
represent the turnover of the underlying portfolio, Schroder Emerging
Markets Fund Institutional Portfolio (Portfolio). For the year ended
October 31, 1999, the rate represents a combination of the portfolio
turnover of the Portfolio for the period from November 1, 1998 through May
31, 1999, during which time the Fund invested in the Portfolio and the
portfolio turnover rate of the Fund for the period June 1, 1999 through
October 31, 1999, during which time the Fund held direct investments in a
portfolio of securities.

(6) Represents the Portfolio's portfolio turnover rate for the entire fiscal
year ended October 31, 1997.
<PAGE>

- --------------------------------------------------------------------------------

FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.

Please call (800) 464-3108 for complete information and to
obtain the relevant prospectus.

Please read the prospectus carefully before you invest.

<TABLE>
<S> <C>
Schroder Capital Funds (Delaware) Schroder Series Trust
Schroder International Fund Schroder Large Capitalization Equity Fund
Schroder Emerging Markets Fund Schroder Small Capitalization Value Fund
Schroder International Smaller Companies Fund Schroder MidCap Value Fund
Schroder Greater China Fund Schroder Investment Grade Income Fund
Schroder U.S. Diversified Growth Fund Schroder Short-Term Investment Fund
Schroder U.S. Smaller Companies Fund
Schroder Micro Cap Fund

Schroder Series Trust II
Schroder All-Asia Fund
</TABLE>

- --------------------------------------------------------------------------------
<PAGE>

Investment Adviser
Schroder Investment Management North America Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019

Administrator and Distributor
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019

Subadministrator and Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Transfer and Dividend Disbursing Agent
Boston Financial Data Services, Inc.
66 Brooks Drive
Braintree, Massachusetts 02184
(800) 464-3108

Counsel
Ropes & Gray
One International Place
Boston, Massachusetts 02110

Independent Accountants
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109

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SCHRODER CAPITAL FUNDS (DELAWARE)

Schroder Emerging Markets Fund Institutional Portfolio

You may review and copy information about the Fund, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at (800) SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust and the Fund on the Commission's Internet site at
www.sec.gov. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-1911.

Schroder Capital Funds (Delaware)
P.O. Box 8507
Boston, MA 02266
800-464-3108

File No. 811-1911
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SCHRODER CAPITAL FUNDS (DELAWARE)

Schroder International Fund
Schroder Emerging Markets Fund
Schroder International Smaller Companies Fund
Schroder Greater China Fund
Schroder U.S. Diversified Growth Fund
Schroder U.S. Smaller Companies Fund
Schroder Micro Cap Fund

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION

March 1, 2000

This Statement of Additional Information (SAI) is not a prospectus and is only
authorized for distribution when accompanied or preceded by a Prospectus for the
Funds, as amended or supplemented from time to time. This SAI relates to the
Funds' Investor Shares and Advisor Shares. Investor Shares and Advisor Shares
are offered through separate Prospectuses, each dated March 1, 2000. This SAI
contains information which may be useful to investors but which is not included
in the Prospectuses. Investors may obtain free copies of the Prospectuses by
calling the Trust at 800-464-3108.

Certain disclosure has been incorporated by reference into this SAI from the
Funds' annual report. For a free copy of the annual report, please call
800-464-3108.
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Table of Contents

TRUST HISTORY..................................................................1
FUND CLASSIFICATION............................................................1
CAPITALIZATION AND SHARE CLASSES...............................................1
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND
RISKS.....................................................................2
INVESTMENT RESTRICTIONS.......................................................15
TRUSTEES AND OFFICERS.........................................................23
SCHRODER AND ITS AFFILIATES...................................................26
INVESTMENT ADVISORY AGREEMENTS................................................27
ADMINISTRATIVE SERVICES.......................................................30
DISTRIBUTOR...................................................................32
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................33
DETERMINATION OF NET ASSET VALUE..............................................36
REDEMPTIONS IN KIND...........................................................38
TAXES 38
PRINCIPAL HOLDERS OF SECURITIES...............................................40
PERFORMANCE INFORMATION.......................................................40
CUSTODIAN.....................................................................42
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT..................................42
INDEPENDENT ACCOUNTANTS.......................................................42
LEGAL COUNSEL.................................................................42
SHAREHOLDER LIABILITY.........................................................42
FINANCIAL STATEMENTS..........................................................42
APPENDIX A...................................................................A-1
APPENDIX B...................................................................B-1

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SCHRODER CAPITAL FUNDS (DELAWARE)

STATEMENT OF ADDITIONAL INFORMATION

TRUST HISTORY

Schroder Capital Funds (Delaware) was organized as a Maryland corporation on
July 30, 1969; reorganized on February 29, 1988 as Schroder Capital Funds, Inc.;
and reorganized as a Delaware business trust organized under the laws of the
State of Delaware on January 9, 1996. The Trust's Trust Instrument, which is
governed by Delaware law, is on file with the Secretary of State of the State of
Delaware. Schroder Investment Management North America Inc. ("Schroder") and its
corporate predecessors have served as investment adviser to the Trust since its
inception.

FUND CLASSIFICATION

The Trust currently offers shares of beneficial interest of eight series with
separate investment objectives and policies. Seven funds (the "Funds") are
offered pursuant to the Prospectuses and this SAI. Each Fund is an open-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"). Each Fund other than Schroder
Emerging Markets Fund and Schroder Greater China Fund is a "diversified"
investment company under the Investment Company Act. For a diversified
investment company, this means that with respect to 75% of a Fund's total
assets, the Fund may not invest in securities of any issuer if, immediately
after such investment, more than 5% of the total assets of the Fund (taken at
current value) would be invested in the securities of that issuer (this
limitation does not apply to investments in U.S. Government securities). None of
the diversified Funds is subject to this limitation with respect to the
remaining 25% of its total assets. Each of Schroder Emerging Markets Fund and
Schroder Greater China Fund is a "non-diversified" investment company under the
Investment Company Act, and therefore may invest its assets in a more limited
number of issuers than may diversified investment companies. To the extent a
Fund invests a significant portion of its assets in the securities of a
particular issuer, it will be subject to an increased risk of loss if the market
value of the issuer's securities declines.

CAPITALIZATION AND SHARE CLASSES

The Trust has an unlimited number of shares of beneficial interest that may,
without shareholder approval, be divided into an unlimited number of series of
such shares, which, in turn, may be divided into an unlimited number of classes
of such shares. Each Fund's shares (except Schroder Micro Cap Fund) are
presently divided into two classes, Investor Shares and Advisor Shares, although
Schroder International Fund does not currently offer Advisor Shares. Each class
is offered through a separate Prospectus. Unlike Investor Shares, Advisor Shares
are currently subject to shareholder service fees, so that the performance of a
Fund's Investor Shares will normally be more favorable than that of the Fund's
Advisor Shares over the same time period. A Fund may suspend the sale of shares
at any time.

Shares entitle their holders to one vote per share, with fractional shares
voting proportionally; however, a separate vote will be taken by each Fund or
class of shares on matters affecting the particular Fund or class, as determined
by the Trustees. For example, a change in a fundamental investment policy for a
Fund would be voted upon only by shareholders of that Fund and a change to a
distribution plan relating to a particular class and requiring shareholder
approval would be voted upon only by shareholders of that class. Shares have
noncumulative voting rights. Although the Trust is not required to hold annual
meetings of its shareholders, shareholders have the right to call a meeting to
elect or remove Trustees or to take other actions as provided in the Trust
Instrument. Shares have no preemptive or subscription rights, and are
transferable. Shares are entitled to dividends as declared by the Trustees, and
if a Fund were liquidated, each class of shares of the Fund would receive the
net assets of the Fund attributable to the class. Because Investor and Advisor
Shares are subject to different expenses, a Fund's dividends and other
distributions
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will normally differ between the two classes.

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS

In addition to the principal investment strategies and the principal risks of
the Funds described in the Prospectuses, each Fund may employ other investment
practices and may be subject to additional risks, which are described below.
Because the following is a combined description of investment strategies and
risks for all the Funds, certain strategies or risks described below may not
apply to your Fund. Unless a strategy or policy described below is specifically
prohibited by the investment restrictions listed in the Prospectuses, under
"Investment Restrictions" in this SAI, or by applicable law, a Fund may engage
in each of the practices described below.

Certain Derivative Instruments

Derivative instruments are financial instruments whose value depends upon, or is
derived from, the value of an underlying asset, such as a security, index or
currency. As described below, to the extent permitted under "Investment
Restrictions" below and in the Prospectuses, each Fund may engage in a variety
of transactions involving the use of derivative instruments, including options
and futures contracts on securities and securities indices and options on
futures contracts. These transactions may be used by a Fund for hedging purposes
or, to the extent permitted by applicable law, to increase its current return.
The Funds may also engage in derivative transactions involving foreign
currencies. See "Foreign Currency Transactions."

Options

Each Fund may purchase and sell covered put and call options on its portfolio
securities to enhance investment performance and to protect against changes in
market prices.

Covered call options. A Fund may write covered call options on its portfolio
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the Fund.

A call option gives the holder the right to purchase, and obligates the writer
to sell, a security at the exercise price at any time before the expiration
date. A call option is "covered" if the writer, at all times while obligated as
a writer, either owns the underlying securities (or comparable securities
satisfying the cover requirements of the securities exchanges), or has the right
to acquire such securities through immediate conversion of securities.

In return for the premium received when it writes a covered call option, the
Fund gives up some or all of the opportunity to profit from an increase in the
market price of the securities covering the call option during the life of the
option. The Fund retains the risk of loss should the price of such securities
decline. If the option expires unexercised, the Fund realizes a gain equal to
the premium, which may be offset by a decline in price of the underlying
security. If the option is exercised, the Fund realizes a gain or loss equal to
the difference between the Fund's cost for the underlying security and the
proceeds of the sale (exercise price minus commissions) plus the amount of the
premium.

A Fund may terminate a call option that it has written before it expires by
entering into a closing purchase transaction. A Fund may enter into closing
purchase transactions in order to free itself to sell the underlying security or
to write another call on the security, realize a profit on a previously written
call option, or protect a security from being called in an unexpected market
rise. Any profits from a closing purchase transaction may be offset by a decline
in the value of the underlying security. Conversely, because increases in the
market price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from a closing purchase
transaction is likely to be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Fund.
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Covered put options. A Fund may write covered put options in order to enhance
its current return. Such options transactions may also be used as a limited form
of hedging against an increase in the price of securities that the Fund plans to
purchase. A put option gives the holder the right to sell, and obligates the
writer to buy, a security at the exercise price at any time before the
expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.

In addition to the receipt of premiums and the potential gains from terminating
such options in closing purchase transactions, the Fund also receives interest
on the cash and debt securities maintained to cover the exercise price of the
option. By writing a put option, the Fund assumes the risk that it may be
required to purchase the underlying security for an exercise price higher than
its then current market value, resulting in a potential capital loss unless the
security later appreciates in value.

A Fund may terminate a put option that it has written before it expires by a
closing purchase transaction. Any loss from this transaction may be partially or
entirely offset by the premium received on the terminated option.

Purchasing put and call options. A Fund may also purchase put options to protect
portfolio holdings against a decline in market value. This protection lasts for
the life of the put option because the Fund, as a holder of the option, may sell
the underlying security at the exercise price regardless of any decline in its
market price. In order for a put option to be profitable, the market price of
the underlying security must decline sufficiently below the exercise price to
cover the premium and transaction costs that the Fund must pay. These costs will
reduce any profit the Fund might have realized had it sold the underlying
security instead of buying the put option.

A Fund may purchase call options to hedge against an increase in the price of
securities that the Fund wants ultimately to buy. Such hedge protection is
provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.

A Fund may also purchase put and call options to enhance its current return. A
Fund may also buy and sell combinations of put and call options on the same
underlying security to earn additional income.

Options on foreign securities. A Fund may purchase and sell options on foreign
securities if in Schroder's opinion the investment characteristics of such
options, including the risks of investing in such options, are consistent with
the Fund's investment objectives. It is expected that risks related to such
options will not differ materially from risks related to options on U.S.
securities. However, position limits and other rules of foreign exchanges may
differ from those in the U.S. In addition, options markets in some countries,
many of which are relatively new, may be less liquid than comparable markets in
the U.S.

Risks involved in the sale of options. Options transactions involve certain
risks, including the risks that Schroder will not forecast interest rate or
market movements correctly, that a Fund may be unable at times to close out such
positions, or that hedging transactions may not accomplish their purpose because
of imperfect market correlations. The successful use of these strategies depends
on the ability of Schroder to forecast market and interest rate movements
correctly.

An exchange-listed option may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although a Fund will enter
into an option position only if Schroder believes that a liquid secondary market
exists, there is no assurance that a liquid secondary market on an exchange will
exist for any particular option or at any particular time. If no secondary
market were to exist, it would be impossible to enter into a closing transaction
to close out an option position. As a result, a Fund may be
<PAGE>

forced to continue to hold, or to purchase at a fixed price, a security on which
it has sold an option at a time when Schroder believes it is inadvisable to do
so.

Higher than anticipated trading activity or order flow or other unforeseen
events might cause The Options Clearing Corporation or an exchange to institute
special trading procedures or restrictions that might restrict the Funds' use of
options. The exchanges have established limitations on the maximum number of
calls and puts of each class that may be held or written by an investor or group
of investors acting in concert. It is possible that the Funds and other clients
of Schroder may be considered such a group. These position limits may restrict
the Funds' ability to purchase or sell options on particular securities.

As described below, each Fund generally expects that its options transactions
will be conducted on recognized exchanges. In certain instances, however, a Fund
may purchase and sell options in the over-the-counter markets. Options which are
not traded on national securities exchanges may be closed out only with the
other party to the option transaction. For that reason, it may be more difficult
to close out over-the-counter options than exchange-traded options. Options in
the over-the-counter market may also involve the risk that securities dealers
participating in such transactions would be unable to meet their obligations to
a Fund. Furthermore, over-the-counter options are not subject to the protection
afforded purchasers of exchange-traded options by The Options Clearing
Corporation. A Fund will, however, engage in over-the-counter options
transactions only when appropriate exchange-traded options transactions are
unavailable and when, in the opinion of Schroder, the pricing mechanism and
liquidity of the over-the-counter markets are satisfactory and the participants
are responsible parties likely to meet their contractual obligations. A Fund
will treat over-the-counter options (and, in the case of options sold by the
Fund, the underlying securities held by the Fund) as illiquid investments as
required by applicable law.

Government regulations, particularly the requirements for qualification as a
"regulated investment company" under the United States Internal Revenue Code of
1986, may also restrict the Trust's use of options.

Futures Contracts

In order to hedge against the effects of adverse market changes, each Fund that
may invest in debt securities may buy and sell futures contracts on U.S.
Government securities and other debt securities in which the Fund may invest,
and on indices of debt securities. In addition, each Fund that may invest in
equity securities may purchase and sell stock index futures to hedge against
changes in stock market prices. Each Fund may also, to the extent permitted by
applicable law, buy and sell futures contracts and options on futures contracts
to increase the Fund's current return. All such futures and related options
will, as may be required by applicable law, be traded on exchanges that are
licensed and regulated by the Commodity Futures Trading Commission (the "CFTC").
Depending upon the change in the value of the underlying security or index when
a Fund enters into or terminates a futures contract, the Fund may realize a gain
or loss.

Futures on Debt Securities and Related Options. A futures contract on a debt
security is a binding contractual commitment which, if held to maturity, will
result in an obligation to make or accept delivery, during a particular month,
of securities having a standardized face value and rate of return. By purchasing
futures on debt securities -- assuming a "long" position -- a Fund will legally
obligate itself to accept the future delivery of the underlying security and pay
the agreed price. By selling futures on debt securities -- assuming a "short"
position -- it will legally obligate itself to make the future delivery of the
security against payment of the agreed price. Open futures positions on debt
securities will be valued at the most recent settlement price, unless that price
does not, in the judgment of persons acting at the direction of the Trustees as
to the valuation of the Fund's assets, reflect the fair value of the contract,
in which case the positions will be valued by the Trustees or such persons.

whenever it appears economically advantageous to the Fund to do so. A clearing
corporation associated with the exchange on which futures are traded assumes
responsibility for such closing transactions and guarantees that a Fund's sale
and purchase obligations under closed-out positions will be performed at the
termination of the contract.

Hedging by use of futures on debt securities seeks to establish more certainly
than would otherwise be possible the effective rate of return on portfolio
securities. A Fund may, for example, take a "short" position in the futures
market by selling contracts for the future delivery of debt securities held by
the Fund (or securities having characteristics similar to those held by the
Fund) in order to hedge against an anticipated rise in interest rates that would
adversely affect the value of the Fund's portfolio securities. When hedging of
this character is successful, any depreciation in the value of portfolio
securities may substantially be offset by appreciation in the value of the
futures position.

On other occasions, a Fund may take a "long" position by purchasing futures on
debt securities. This would be done, for example, when the Fund expects to
purchase particular securities when it has the necessary cash, but expects the
rate of return available in the securities markets at that time to be less
favorable than rates currently available in the futures markets. If the
anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Fund of purchasing
the securities may be offset, at least to some extent, by the rise in the value
of the futures position taken in anticipation of the subsequent securities
purchase.

Successful use by a Fund of futures contracts on debt securities is subject to
Schroder's ability to predict correctly movements in the direction of interest
rates and other factors affecting markets for debt securities. For example, if a
Fund has hedged against the possibility of an increase in interest rates which
would adversely affect the market prices of debt securities held by it and the
prices of such securities increase instead, the Fund will lose part or all of
the benefit of the increased value of its securities which it has hedged because
it will have offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to sell securities to
meet daily maintenance margin requirements. The Fund may have to sell securities
at a time when it may be disadvantageous to do so.

A Fund may purchase and write put and call options on certain debt futures
contracts, as they become available. Such options are similar to options on
securities except that options on futures contracts give the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. A Fund
will be required to deposit initial margin and maintenance margin with respect
to put and call options on futures contracts written by it pursuant to brokers'
requirements, and, in addition, net option premiums received will be included as
initial margin deposits. See "Margin Payments" below. Compared to the purchase
or sale of futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to a Fund because the maximum amount at
risk is the premium paid for the options plus transactions costs. However, there
may be circumstances when the purchase of call or put options on a futures
contract would result in a loss to a Fund when the purchase or sale of the
futures contracts would not, such as when there is no movement in the prices of
debt securities. The writing of a put or call option on a futures contract
involves risks similar to those risks relating to the purchase or sale of
futures contracts.

Index Futures Contracts and Options. A Fund may invest in debt index futures
contracts and stock index futures contracts, and in related options. A debt
index futures contract is a contract to buy or sell units of a specified debt
index at a specified future date at a price agreed upon when the contract is
made. A unit is the current value of the index. A stock index futures contract
is a contract to buy or sell units of a stock index at a specified future date
at a price agreed upon when the contract is made. A unit is the current value of
the stock index.

Depending on the change in the value of the index between the time when a Fund
enters into and
<PAGE>

terminates an index futures transaction, the Fund may realize a gain or loss.
The following example illustrates generally the manner in which index futures
contracts operate. The Standard & Poor's 100 Stock Index is composed of 100
selected common stocks, most of which are listed on the New York Stock Exchange.
The S&P 100 Index assigns relative weightings to the common stocks included in
the Index, and the Index fluctuates with changes in the market values of those
common stocks. In the case of the S&P 100 Index, contracts are to buy or sell
100 units. Thus, if the value of the S&P 100 Index were $180, one contract would
be worth $18,000 (100 units x $180). The stock index futures contract specifies
that no delivery of the actual stocks making up the index will take place.
Instead, settlement in cash must occur upon the termination of the contract,
with the settlement being the difference between the contract price and the
actual level of the stock index at the expiration of the contract. For example,
if a Fund enters into a futures contract to buy 100 units of the S&P 100 Index
at a specified future date at a contract price of $180 and the S&P 100 Index is
at $184 on that future date, the Fund will gain $400 (100 units x gain of $4).
If the Fund enters into a futures contract to sell 100 units of the stock index
at a specified future date at a contract price of $180 and the S&P 100 Index is
at $182 on that future date, the Fund will lose $200 (100 units x loss of $2).

A Fund may purchase or sell futures contracts with respect to any securities
indices. Positions in index futures may be closed out only on an exchange or
board of trade which provides a secondary market for such futures.

In order to hedge a Fund's investments successfully using futures contracts and
related options, a Fund must invest in futures contracts with respect to indices
or sub-indices the movements of which will, in Schroder's judgment, have a
significant correlation with movements in the prices of the Fund's portfolio
securities.

Options on index futures contracts are similar to options on securities except
that options on index futures contracts give the purchaser the right, in return
for the premium paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the holder would assume the underlying futures position
and would receive a variation margin payment of cash or securities approximating
the increase in the value of the holder's option position. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash based on the difference between the
exercise price of the option and the closing level of the index on which the
futures contract is based on the expiration date. Purchasers of options who fail
to exercise their options prior to the exercise date suffer a loss of the
premium paid.

As an alternative to purchasing and selling call and put options on index
futures contracts, each of the Funds that may purchase and sell index futures
contracts may purchase and sell call and put options on the underlying indices
themselves to the extent that such options are traded on national securities
exchanges. Index options are similar to options on individual securities in that
the purchaser of an index option acquires the right to buy (in the case of a
call) or sell (in the case of a put), and the writer undertakes the obligation
to sell or buy (as the case may be), units of an index at a stated exercise
price during the term of the option. Instead of giving the right to take or make
actual delivery of securities, the holder of an index option has the right to
receive a cash "exercise settlement amount". This amount is equal to the amount
by which the fixed exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of the underlying
index on the date of the exercise, multiplied by a fixed "index multiplier".

A Fund may purchase or sell options on stock indices in order to close out its
outstanding positions in options on stock indices which it has purchased. A Fund
may also allow such options to expire unexercised.

Compared to the purchase or sale of futures contracts, the purchase of call or
put options on an index involves less potential risk to a Fund because the
maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
<PAGE>

those risks relating to the purchase or sale of index futures contracts.

A Fund may also purchase warrants, issued by banks and other financial
institutions, whose values are based on the values from time to time of one or
more securities indices.

Margin Payments. When a Fund purchases or sells a futures contract, it is
required to deposit with its custodian an amount of cash, U.S. Treasury bills,
or other permissible collateral equal to a small percentage of the amount of the
futures contract. This amount is known as "initial margin". The nature of
initial margin is different from that of margin in security transactions in that
it does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to a Fund upon termination of the contract, assuming a Fund satisfies its
contractual obligations.

Subsequent payments to and from the broker occur on a daily basis in a process
known as "marking to market". These payments are called "variation margin" and
are made as the value of the underlying futures contract fluctuates. For
example, when a Fund sells a futures contract and the price of the underlying
debt security rises above the delivery price, the Fund's position declines in
value. The Fund then pays the broker a variation margin payment equal to the
difference between the delivery price of the futures contract and the market
price of the securities underlying the futures contract. Conversely, if the
price of the underlying security falls below the delivery price of the contract,
the Fund's futures position increases in value. The broker then must make a
variation margin payment equal to the difference between the delivery price of
the futures contract and the market price of the securities underlying the
futures contract.

When a Fund terminates a position in a futures contract, a final determination
of variation margin is made, additional cash is paid by or to the Fund, and the
Fund realizes a loss or a gain. Such closing transactions involve additional
commission costs.

Special Risks of Transactions in Futures Contracts and Related Options

Liquidity Risks. Positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
Although each Fund intends to purchase or sell futures only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular time. If there is
not a liquid secondary market at a particular time, it may not be possible to
close a futures position at such time and, in the event of adverse price
movements, a Fund would continue to be required to make daily cash payments of
variation margin. However, in the event financial futures are used to hedge
portfolio securities, such securities will not generally be sold until the
financial futures can be terminated. In such circumstances, an increase in the
price of the portfolio securities, if any, may partially or completely offset
losses on the financial futures.

In addition to the risks that apply to all options transactions, there are
several special risks relating to options on futures contracts. The ability to
establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
such a market will develop. Although a Fund generally will purchase only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options with the result that a Fund would have to exercise the options
in order to realize any profit.

Hedging Risks. There are several risks in connection with the use by a Fund of
futures contracts and related options as a hedging device. One risk arises
because of the imperfect correlation between movements in the prices of the
futures contracts and options and movements in the underlying securities or
index or in the prices of a Fund's securities which are the subject of a hedge.
Schroder will, however, attempt to reduce this risk by purchasing and selling,
to the extent possible, futures contracts and related options on securities and
indices the movements of which will, in its judgment, correlate closely with
movements in the prices of the underlying securities or index and a Fund's
portfolio securities sought to be
<PAGE>

hedged.

Successful use of futures contracts and options by a Fund for hedging purposes
is also subject to Schroder's ability to predict correctly movements in the
direction of the market. It is possible that, where a Fund has purchased puts on
futures contracts to hedge its portfolio against a decline in the market, the
securities or index on which the puts are purchased may increase in value and
the value of securities held in the portfolio may decline. If this occurred, the
Fund would lose money on the puts and also experience a decline in value in its
portfolio securities. In addition, the prices of futures, for a number of
reasons, may not correlate perfectly with movements in the underlying securities
or index due to certain market distortions. First, all participants in the
futures market are subject to margin deposit requirements. Such requirements may
cause investors to close futures contracts through offsetting transactions which
could distort the normal relationship between the underlying security or index
and futures markets. Second, the margin requirements in the futures markets are
less onerous than margin requirements in the securities markets in general, and
as a result the futures markets may attract more speculators than the securities
markets do. Increased participation by speculators in the futures markets may
also cause temporary price distortions. Due to the possibility of price
distortion, even a correct forecast of general market trends by Schroder may
still not result in a successful hedging transaction over a very short time
period.

Lack of Availability. Because the markets for certain options and futures
contracts and other derivative instruments in which a Fund may invest (including
markets located in foreign countries) are relatively new and still developing
and may be subject to regulatory restraints, a Fund's ability to engage in
transactions using such instruments may be limited. Suitable derivative
transactions may not be available in all circumstances and there is no assurance
that a Fund will engage in such transactions at any time or from time to time. A
Fund's ability to engage in hedging transactions may also be limited by certain
regulatory and tax considerations.

Other Risks. Each Fund will incur brokerage fees in connection with its futures
and options transactions. In addition, while futures contracts and options on
futures may be purchased and sold to reduce certain risks, those transactions
themselves entail certain other risks. Thus, while a Fund may benefit from the
use of futures and related options, unanticipated changes in interest rates or
stock price movements may result in a poorer overall performance for the Fund
than if it had not entered into any futures contracts or options transactions.
Moreover, in the event of an imperfect correlation between the futures position
and the portfolio position which is intended to be protected, the desired
protection may not be obtained and the Fund may be exposed to risk of loss.

Forward Commitments

Each Fund may enter into contracts to purchase securities for a fixed price at a
future date beyond customary settlement time ("forward commitments") if the Fund
holds, and maintains until the settlement date in a segregated account, cash or
liquid securities in an amount sufficient to meet the purchase price, or if the
Fund enters into offsetting contracts for the forward sale of other securities
it owns. Forward commitments may be considered securities in themselves, and
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, which risk is in addition to the risk of decline
in the value of the Fund's other assets. Where such purchases are made through
dealers, the Fund relies on the dealer to consummate the sale. The dealer's
failure to do so may result in the loss to the Fund of an advantageous yield or
price.

Although a Fund will generally enter into forward commitments with the intention
of acquiring securities for its portfolio or for delivery pursuant to options
contracts it has entered into, a Fund may dispose of a commitment prior to
settlement if Schroder deems it appropriate to do so. A Fund may realize
short-term profits or losses upon the sale of forward commitments.

Repurchase Agreements

Each Fund (other than Schroder U.S. Diversified Growth Fund) may enter into
repurchase agreements. A
<PAGE>

repurchase agreement is a contract under which the Fund acquires a security for
a relatively short period (usually not more than one week) subject to the
obligation of the seller to repurchase and the Fund to resell such security at a
fixed time and price (representing the Fund's cost plus interest). It is the
Trust's present intention to enter into repurchase agreements only with member
banks of the Federal Reserve System and securities dealers meeting certain
criteria as to creditworthiness and financial condition, and only with respect
to obligations of the U.S. Government or its agencies or instrumentalities or
other high quality short-term debt obligations. Repurchase agreements may also
be viewed as loans made by a Fund which are collateralized by the securities
subject to repurchase. Schroder will monitor such transactions to ensure that
the value of the underlying securities will be at least equal at all times to
the total amount of the repurchase obligation, including the interest factor. If
the seller defaults, a Fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of sale including accrued interest are
less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, a Fund may incur delay and costs in selling the underlying security
or may suffer a loss of principal and interest if a Fund is treated as an
unsecured creditor and required to return the underlying collateral to the
seller's estate.

When-Issued Securities

Each Fund may from time to time purchase securities on a "when-issued" basis.
Debt securities are often issued on this basis. The price of such securities,
which may be expressed in yield terms, is fixed at the time a commitment to
purchase is made, but delivery and payment for the when-issued securities take
place at a later date. Normally, the settlement date occurs within one month of
the purchase. During the period between purchase and settlement, no payment is
made by a Fund and no interest accrues to the Fund. To the extent that assets of
a Fund are held in cash pending the settlement of a purchase of securities, that
Fund would earn no income. While a Fund may sell its right to acquire
when-issued securities prior to the settlement date, a Fund intends actually to
acquire such securities unless a sale prior to settlement appears desirable for
investment reasons. At the time a Fund makes the commitment to purchase a
security on a when-issued basis, it will record the transaction and reflect the
amount due and the value of the security in determining the Fund's net asset
value. The market value of the when-issued securities may be more or less than
the purchase price payable at the settlement date. Each Fund will establish a
segregated account in which it will maintain cash and U.S. Government securities
or other liquid securities at least equal in value to commitments for
when-issued securities. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date.

Loans of Fund Portfolio Securities

Each Fund (other than Schroder International Fund and Schroder U.S. Diversified
Growth) may lend its portfolio securities, provided: (1) the loan is secured
continuously by collateral consisting of U.S. Government securities, cash, or
cash equivalents adjusted daily to have market value at least equal to the
current market value of the securities loaned; (2) the Fund may at any time call
the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of the Fund's portfolio securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it is anticipated
that the Fund may share with the borrower some of the income received on the
collateral for the loan or that it will be paid a premium for the loan. Before a
Fund enters into a loan, Schroder considers all relevant facts and
circumstances, including the creditworthiness of the borrower. The risks in
lending portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Although voting rights or
rights to consent with respect to the loaned securities pass to the borrower, a
Fund retains the right to call the loans at any time on reasonable notice, and
it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. A Fund will not lend portfolio securities
to borrowers affiliated with that Fund.

Foreign Securities
<PAGE>

Each Fund may invest in securities principally traded in foreign markets.
Schroder International Fund, Schroder Emerging Markets Fund, Schroder
International Smaller Companies Fund, and Schroder Greater China Fund invest
primarily in foreign securities. Each Fund (other than Schroder Greater China
Fund) may also invest in Eurodollar certificates of deposit and other
certificates of deposit issued by United States branches of foreign banks and
foreign branches of United States banks.

Investments in foreign securities may involve risks and considerations different
from or in addition to investments in domestic securities. There may be less
information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those in
the United States. The securities of some foreign companies are less liquid and
at times more volatile than securities of comparable U.S. companies. Foreign
brokerage commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of a Fund's assets held abroad) and expenses not present in the
settlement of domestic investments. Also, because foreign securities are
normally denominated and traded in foreign currencies, the values of a Fund's
assets may be affected favorably or unfavorably by currency exchange rates and
exchange control regulations, and a Fund may incur costs in connection with
conversion between currencies.

In addition, with respect to certain foreign countries, there is a possibility
of nationalization or expropriation of assets, imposition of currency exchange
controls, adoption of foreign governmental restrictions affecting the payment of
principal and interest, imposition of withholding or confiscatory taxes,
political or financial instability, and adverse political, diplomatic or
economic developments which could affect the values of investments in those
countries. In certain countries, legal remedies available to investors may be
more limited than those available with respect to investments in the United
States or other countries and it may be more difficult to obtain and enforce a
judgment against a foreign issuer. Also, the laws of some foreign countries may
limit a Fund's ability to invest in securities of certain issuers located in
those countries. Special tax considerations apply to foreign securities.

In determining whether to invest in securities of foreign issuers for a Fund
seeking current income, Schroder will consider the likely impact of foreign
taxes on the net yield available to the Fund and its shareholders. Income
received by a Fund from sources within foreign countries may be reduced by
withholding and other taxes imposed by such countries. Tax conventions between
certain countries and the United States may reduce or eliminate such taxes. It
is impossible to determine the effective rate of foreign tax in advance since
the amount of a Fund's assets to be invested in various countries is not known,
and tax laws and their interpretations may change from time to time and may
change without advance notice. Any such taxes paid by a Fund will reduce its net
income available for distribution to shareholders.

Emerging Market Securities

Certain Funds, and particularly Schroder Emerging Markets Fund and Schroder
Greater China Fund, invest in securities of companies determined by Schroder to
be "emerging market" issuers. The risks of investing in foreign securities are
particularly high when securities of issuers based in developing or emerging
market countries are involved. Investing in emerging market countries involves
certain risks not typically associated with investing in U.S. securities, and
imposes risks greater than, or in addition to, risks of investing in foreign,
developed countries. These risks include: greater risks of nationalization or
expropriation of assets or confiscatory taxation; currency devaluations and
other currency exchange rate fluctuations; greater social, economic and
political uncertainty and instability (including the risk of war); more
substantial government involvement in the economy; less government supervision
and regulation of the securities markets and participants in those markets;
controls on foreign investment and limitations on repatriation of invested
capital and on a Fund's ability to exchange local currencies for U.S. dollars;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be smaller,
less seasoned and newly organized companies; the difference in, or lack of,
auditing and financial reporting standards, which may result in unavailability
of material information about issuers; the risk that it may be more difficult to
obtain and/or enforce a
<PAGE>

judgment in a court outside the United States; and greater price volatility,
substantially less liquidity, and significantly smaller market capitalization of
securities markets. Also, any change in the leadership or politics of emerging
market countries, or the countries that exercise a significant influence over
those countries, may halt the expansion of or reverse the liberalization of
foreign investment policies now occurring and adversely affect existing
investment opportunities.

In addition, a number of emerging market countries restrict, to various degrees,
foreign investment in securities. Furthermore, high rates of inflation and rapid
fluctuations in inflation rates have had, and may continue to have, negative
effects on the economies and securities markets of certain emerging market
countries.

Foreign Currency Transactions

Each Fund may engage in currency exchange transactions to protect against
uncertainty in the level of future foreign currency exchange rates and to
increase current return. A Fund may engage in both "transaction hedging" and
"position hedging".

When it engages in transaction hedging, a Fund enters into foreign currency
transactions with respect to specific receivables or payables of that Fund
generally arising in connection with the purchase or sale of its portfolio
securities. A Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging, a Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.

A Fund may purchase or sell a foreign currency on a spot (or cash) basis at the
prevailing spot rate in connection with transaction hedging. A Fund may also
enter into contracts to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts.

For transaction hedging purposes, a Fund may also purchase exchange-listed and
over-the-counter call and put options on foreign currency futures contracts and
on foreign currencies. A put option on a futures contract gives a Fund the right
to assume a short position in the futures contract until expiration of the
option. A put option on currency gives a Fund the right to sell a currency at an
exercise price until the expiration of the option. A call option on a futures
contract gives a Fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives a
Fund the right to purchase a currency at the exercise price until the expiration
of the option. A Fund will engage in over-the-counter transactions only when
appropriate exchange-traded transactions are unavailable and when, in Schroder's
opinion, the pricing mechanism and liquidity are satisfactory and the
participants are responsible parties likely to meet their contractual
obligations.

When it engages in position hedging, a Fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which securities held by a Fund are denominated or are quoted in
their principal trading markets or an increase in the value of currency for
securities which a Fund expects to purchase. In connection with position
hedging, a Fund may purchase put or call options on foreign currency and foreign
currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. A Fund may also purchase or sell foreign currency on
a spot basis.

The precise matching of the amounts of foreign currency exchange transactions
and the value of the portfolio securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the values of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.

It is impossible to forecast with precision the market value of a Fund's
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Fund to purchase
<PAGE>

additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency a Fund is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities of a Fund if the market value of such security or securities exceeds
the amount of foreign currency a Fund is obligated to deliver.

To offset some of the costs to a Fund of hedging against fluctuations in
currency exchange rates, a Fund may write covered call options on those
currencies.

Transaction and position hedging do not eliminate fluctuations in the underlying
prices of the securities which a Fund owns or intends to purchase or sell. They
simply establish a rate of exchange which one can achieve at some future point
in time. Additionally, although these techniques tend to minimize the risk of
loss due to a decline in the value of the hedged currency, they tend to limit
any potential gain which might result from the increase in the value of such
currency. Also, suitable foreign currency hedging transactions may not be
available in all circumstances and there can be no assurance that a Fund will
utilize hedging transactions at any time or from time to time.

A Fund may also seek to increase its current return by purchasing and selling
foreign currency on a spot basis, and by purchasing and selling options on
foreign currencies and on foreign currency futures contracts, and by purchasing
and selling foreign currency forward contracts.

Currency Forward and Futures Contracts. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
as agreed by the parties, at a price set at the time of the contract. In the
case of a cancelable forward contract, the holder has the unilateral right to
cancel the contract at maturity by paying a specified fee. The contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.

Forward foreign currency exchange contracts differ from foreign currency futures
contracts in certain respects. For example, the maturity date of a forward
contract may be any fixed number of days from the date of the contract agreed
upon by the parties, rather than a predetermined date in a given month. Forward
contracts may be in any amounts agreed upon by the parties rather than
predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.

At the maturity of a forward or futures contract, a Fund may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.

Positions in foreign currency futures contracts and related options may be
closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although a Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price movements, a Fund would continue to be required to make
daily cash payments of
<PAGE>

variation margin on its futures positions.

Foreign Currency Options. Options on foreign currencies operate similarly to
options on securities, and are traded primarily in the over-the-counter market,
although options on foreign currencies have recently been listed on several
exchanges. Such options will be purchased or written only when Schroder believes
that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specific time. Options on foreign currencies are affected by all of those
factors which influence exchange rates and investments generally.

The value of a foreign currency option is dependent upon the value of the
foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign currencies
and there is no regulatory requirement that quotations available through dealers
or other market sources be firm or revised on a timely basis. Available
quotation information is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(less than $1 million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To the extent that
the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the U.S. options markets.

Foreign Currency Conversion. Although foreign exchange dealers do not charge a
fee for currency conversion, they do realize a profit based on the difference
(the "spread") between prices at which they buy and sell various currencies.
Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should a Fund desire to resell that currency
to the dealer.

Warrants to Purchase Securities

Certain Funds may invest in warrants to purchase securities. Bonds issued with
warrants attached to purchase equity securities have many characteristics of
convertible bonds and their prices may, to some degree, reflect the performance
of the underlying stock. Bonds also may be issued with warrants attached to
purchase additional fixed income securities at the same coupon rate. A decline
in interest rates would permit the Fund to buy additional bonds at the favorable
rate or to sell the warrants at a profit. If interest rates rise, the warrants
would generally expire with no value.

Zero-Coupon Securities

Zero-coupon securities in which a Fund may invest are debt obligations which are
generally issued at a discount and payable in full at maturity, and which do not
provide for current payments of interest prior to maturity. Zero-coupon
securities usually trade at a deep discount from their face or par value and are
subject to greater market value fluctuations from changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest. As a result, the net asset value of shares of a Fund investing in
zero-coupon securities may fluctuate over a greater range than shares of other
Funds of the Trust and other mutual funds investing in securities making current
distributions of interest and having similar maturities. A Fund investing in
zero-coupon bonds is required to distribute the income on these securities as
the income accrues, even though the Fund is not receiving the income in cash on
a current basis. Thus, the Fund may have to sell other investments, including
when it may not be advisable to do so, to make income distributions.

been separated by their holder, typically a custodian bank or investment
brokerage firm. A number of securities firms and banks have stripped the
interest coupons from the underlying principal (the "corpus") of U.S. Treasury
securities and resold them in custodial receipt programs with a number of
different names, including Treasury Income Growth Receipts ("TIGRS") and
Certificates of Accrual on Treasuries ("CATS"). CATS and TIGRS are not
considered U.S. Government securities. The underlying U.S. Treasury bonds and
notes themselves are held in book-entry form at the Federal Reserve Bank or, in
the case of bearer securities (i.e., unregistered securities which are owned
ostensibly by the bearer or holder thereof), in trust on behalf of the owners
thereof.

In addition, the Treasury has facilitated transfers of ownership of zero-coupon
securities by accounting separately for the beneficial ownership of particular
interest coupons and corpus payments on Treasury securities through the Federal
Reserve book-entry record-keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS" or "Separate Trading
of Registered Interest and Principal of Securities." Under the STRIPS program, a
Fund will be able to have its beneficial ownership of U.S. Treasury zero-coupon
securities recorded directly in the book-entry record-keeping system in lieu of
having to hold certificates or other evidences of ownership of the underlying
U.S. Treasury securities.

When debt obligations have been stripped of their unmatured interest coupons by
the holder, the stripped coupons are sold separately. The principal or corpus is
sold at a deep discount because the buyer receives only the right to receive a
future fixed payment on the security and does not receive any rights to periodic
cash interest payments. Once stripped or separated, the corpus and coupons may
be sold separately. Typically, the coupons are sold separately or grouped with
other coupons with like maturity dates and sold in such bundled form. Purchasers
of stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero-coupon securities issued directly by the
obligor.

Short Sales

To the extent permitted under "Investment Restrictions" below and in the
Prospectuses, a Fund may engage in "short sales", whereby a Fund sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. A Fund also may engage in short sales if, at the time of the
short sale, it owns or has the right to obtain, at no additional cost, an equal
amount of the security being sold short. This investment technique is known as a
short sale "against-the-box." In such a short sale, a seller does not
immediately deliver the securities sold and is said to have a short position in
those securities until delivery occurs. If a Fund engages in a short sale, the
collateral for the short position is maintained by the Fund's custodian or a
qualified sub-custodian. While the short sale is open, a Fund maintains in a
segregated account an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities. These securities constitute the Fund's long position. A
Fund does not engage in short sales against-the-box for speculative purposes but
may, however, make a short sale as a hedge, when Schroder believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund (or a security convertible or exchangeable for such security).
There are certain additional transaction costs associated with short sales
against-the-box, but Schroder endeavors to offset these costs with the income
from the investment of the cash proceeds of short sales. Under the Taxpayer
Relief Act of 1997, activities by a Fund which lock-in gain on an appreciated
financial instrument generally will be treated as a "constructive sale" of such
instrument which will trigger gain (but not loss) for federal income tax
purposes. Such activities may create taxable income in excess of the cash they
generate.

Temporary Defensive Strategies

As described in the Prospectuses, Schroder may at times judge that conditions in
the securities markets make pursuing a Fund's basic investment strategies
inconsistent with the best interests of its shareholders and may temporarily use
alternate investment strategies primarily designed to reduce fluctuations in the
value of a Fund's assets. In implementing these "defensive" strategies, the Fund
would invest in high-quality debt securities, cash, or money market instruments
to any extent Schroder considers consistent
<PAGE>

with such defensive strategies. It is impossible to predict when, or for how
long, a Fund will use these alternate strategies. One risk of taking such
temporary defensive positions is that the Fund may not achieve its investment
objective.

INVESTMENT RESTRICTIONS

The Trust has adopted the following fundamental and non-fundamental investment
restrictions for each Fund. Each Fund's fundamental investment restrictions may
not be changed without the affirmative vote of a "majority of the outstanding
voting securities" of the affected Fund, which is defined in the Investment
Company Act to mean the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares and (2) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy. The non-fundamental investment policies described in the
Prospectuses and this SAI may be changed by the Trustees without shareholder
approval.

Schroder International Fund

Schroder International Fund will not:

Fundamental Policies:

1. Invest more than 5% of its assets in the securities of any single issuer.
This restriction does not apply to securities issued by the U.S.
Government, its agencies or instrumentalities.

2. Purchase more than 10% of the voting securities of any one issuer.

3. Invest more than 10% of its assets in "illiquid securities" (securities
that cannot be disposed of within seven days at their then-current value).
For purposes of this limitation, "illiquid securities" includes, except in
those circumstances described below: (1) "restricted securities", which
are securities than cannot be resold to the public without registration
under federal securities law; and (2) securities of issuers (together with
all predecessors) having a record of less than three years of continuous
operation.

4. Invest 25% or more of the value of its total assets in any one industry.

5. Borrow money, except from banks for temporary emergency purposes, and then
only in an amount not exceeding 5% of the value of the total assets of the
Fund.

6. Pledge, mortgage or hypothecate its assets to an extent greater than 10%
of the value of its total assets.

7. Purchase securities on margin or sell short.

8. Make investments for the purpose of exercising control or management.

9. Purchase or sell real estate (provided that the Fund may invest in
securities issued by companies that invest in real estate or interests
therein).

10. Make loans to other persons (provided that for purposes of this
restriction, entering into repurchase agreements, acquiring corporate debt
securities and investing in U.S. Government obligations, short-term
commercial paper, certificates of deposit and bankers' acceptances shall
not be deemed to be the making of a loan).

11. Invest in commodities, commodity contracts other than foreign currency
forward contracts, or oil,
<PAGE>

gas and other mineral resource, lease, or arbitrage transactions.

12. Write, purchase or sell options, puts, calls, straddles, spreads, or
combinations thereof.

13. Underwrite securities issued by other persons (except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under U.S. securities laws).

14. Invest in warrants, valued at the lower of cost or market, to more than 5%
of the value of the Fund's net assets. Included within that amount, but
not to exceed 2% of the value of the Fund's net assets, may be warrants
that are not listed on the New York or American Stock Exchange. Warrants
acquired by the Fund in units or attached to securities may be deemed to
be without value.

15. Purchase more than 3% of the outstanding securities of any closed-end
investment company. Any such purchase of securities issued by a closed-end
investment company will otherwise be made in full compliance with Sections
12(d)(1)(a)(i), (ii) and (iii) of the Investment Company Act.

Non-Fundamental Policy:

Schroder International Fund will not invest in restricted securities. This
policy does not include restricted securities eligible for resale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
as amended, that are determined to be liquid by Schroder pursuant to guidelines
adopted by the Board of Trustees of Schroder Capital Funds. Such guidelines take
into account trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of trading
interest in particular Rule 144A securities, these securities may be illiquid.

Schroder Emerging Markets Fund

Schroder Emerging Markets Fund will not:

Fundamental Policies:

1. Purchase a security if, as a result, more than 25% of the Fund's total
assets would be invested in securities of issuers conducting their
principal business activities in the same industry. For purposes of this
limitation, there is no limit on: (1) investments in U.S. Government
securities, in repurchase agreements covering U.S. Government securities,
in securities issued by the states, territories or possessions of the
United States or in foreign government securities; or (2) investment in
issuers domiciled in a single jurisdiction. Notwithstanding anything to
the contrary, to the extent permitted by the Investment Company Act, the
Fund may invest in one or more investment companies; provided that, except
to the extent that it invests in other investment companies pursuant to
Section 12(d)(1)(A) of the Investment Company Act, the Fund treats the
assets of the investment companies in which it invests as its own for
purposes of this policy.

2. Borrow money if, as a result, outstanding borrowings would exceed an
amount equal to one-third of the Fund's total assets.

3. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business).

4. Make loans to other parties. For purposes of this limitation, entering
into repurchase agreements, lending securities and acquiring any debt
security are not deemed to be the making of loans.

5. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or
<PAGE>

other instruments (but this shall not prevent the Fund from purchasing or
selling options and futures contracts or from investing in securities or
other instruments backed by physical commodities).

6. Underwrite (as that term is defined in the Securities Act of 1933, as
amended) securities issued by other persons except, to the extent that in
connection with the disposition of its assets, the Fund may be deemed to
be an underwriter.

7. Issue any class of senior securities except to the extent consistent with
the Investment Company Act.

Nonfundamental Policies:

1. The Fund is "non-diversified" as that term is defined in the Investment
Company Act. To the extent required to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended, the Fund may
not purchase a security (other than a U.S. Government security or a
security of an investment company) if, as a result: (1) with respect to
50% of its assets, more than 5% of the Fund's total assets would be
invested in the securities of any single issuer; (2) with respect to 50%
of its assets, the Fund would own more than 10% of the outstanding
securities of any single issuer; or (3) more than 25% of the Fund's total
assets would be invested in the securities of any single issuer.

2. For purposes of the limitation on borrowing, the following are not treated
as borrowings to the extent they are fully collateralized: (1) the delayed
delivery of purchase securities (such as the purchase of when-issued
securities); (2) reverse repurchase agreements; (3) dollar-roll
transactions; and (4) the lending of securities.

3. Invest more than 15% of its net assets in "illiquid securities", which
include: (1) securities that cannot be disposed of within seven days at
their then-current value; (2) repurchase agreements not entitling the
holder to payment of principal within seven days; and (3) securities
subject to restrictions on the sale of the securities to the public
without registration under the Securities Act of 1933, as amended,
("restricted securities") that are not readily marketable. The Fund may
treat certain restricted securities as liquid pursuant to guidelines
adopted by the Board of Trustees of the Trust or the Board of Schroder
Capital Funds, as the case may be.

4. Make investments for the purpose of exercising control of an issuer.
Investments by the Fund in entities created under the laws of foreign
countries solely to facilitate investment in securities in that country
will not be deemed the making of investments for the purpose of exercising
control.

5. Invest in securities of another investment company, except to the extent
permitted by the Investment Company Act.

6. Sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short
(short sales "against-the-box"), and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.

7. Purchase securities on margin, except that the Fund may use short-term
credit for the clearance of its portfolio's transactions, and provided
that initial and variation margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.

8. Lend a security if, as a result, the amount of loaned securities would
exceed an amount equal to one-third of the Fund's total assets.
<PAGE>

Schroder International Smaller Companies Fund

Schroder International Smaller Companies Fund will not:

Fundamental Policies:

1. With respect to 75% of it assets, purchase a security other than a
security issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or a security of an investment company if, as a result,
more than 5% of the Fund's total assets would be invested in the
securities of a single issuer or the Fund would own more than 10% of the
outstanding voting securities of any single issuer.

2. Concentrate investments in any particular industry; therefore, the Fund
will not purchase the securities of companies in any one industry if,
thereafter, 25% or more of the Fund's total assets would consist of
securities of companies in that industry. This restriction does not apply
to obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities. An investment of more than 25% of the Fund's assets
in the securities of issuers located in one country does not contravene
this policy.

3. Borrow money in excess of 33 1/3% of its total assets taken at market
value (including the amount borrowed) and then only from a bank as a
temporary measure for extraordinary or emergency purposes, including to
meet redemptions or to settle securities transactions that may otherwise
require untimely dispositions of portfolio securities.

4. Purchase or sell real estate, provided that the Fund may invest in
securities issued by companies which invest in real estate or interests
therein.

5. Make loans to other persons, provided that for purposes of this
restriction, entering into repurchase agreements or acquiring any
otherwise permissible debt securities or engaging in securities loans
shall not be deemed to be the making of a loan.

6. Invest in commodities or commodity contracts other than forward foreign
currency exchange contracts.

7. Underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under U.S. securities laws.

8. Issue senior securities except to the extent permitted by the Investment
Company Act.

Non-Fundamental Policy:

1. As a non-fundamental policy, the Fund will not invest more than 15% of its
assets in securities determined by Schroder to be illiquid. Certain
securities that are restricted as to resale may nonetheless be resold by
the Fund in accordance with Rule 144A under the Securities Act of 1933, as
amended. Such securities may be determined by Schroder to be liquid for
purposes of compliance with the limitation on the Fund's investment in
illiquid securities.

Schroder Greater China Fund

Schroder Greater China Fund will not:

Fundamental Policies:

(1) Purchase any security (other than U.S. Government securities) if as a
result more than 25% of the Fund's

<PAGE>

total assets would be invested in a single industry.

(2) Acquire more than 10% of the voting securities of any issuer.

(3) Act as underwriter of securities of other issuers except to the extent
that, in connection with the disposition of portfolio securities, it may
be deemed to be an underwriter under certain federal securities laws.

(4) Issue any class of securities which is senior to the Fund's shares of
beneficial interest, except as contemplated by restriction 6 below.

(5) Purchase or sell real estate or interests in real estate, including real
estate mortgage loans, although it may purchase and sell securities which
are secured by real estate and securities of companies that invest or deal
in real estate limited partnership interests (for purposes of this
restriction, investments by the Fund in mortgage-backed securities and
other securities representing interests in mortgage pools shall not
constitute the purchase or sale of real estate or interests in real estate
or real estate mortgage loans.)

(6) Borrow more than 33-1/3% of the value of its total assets less all
liabilities and indebtedness (other than such borrowings).

(7) Purchase and sell commodities or commodity contracts, except that the Fund
may purchase or sell financial futures contracts, options on futures
contracts, and futures contracts, forward contracts and options with
respect to foreign currencies, and may enter into swap transactions.

(8) Make loans, except by purchase of debt obligations in which the Fund may
invest consistent with its investment policies, by entering into
repurchase agreements, or by lending its portfolio securities.

Non-Fundamental Policies:

1. As a non-fundamental policy, the Fund will not invest in (i) securities
which at the time of such investment are not readily marketable; (ii)
securities restricted as to resale (excluding securities determined by
Trustees of the Trust, or the person designated by the Trustees to make
such determinations, to be readily marketable), and (iii) repurchase
agreements maturing in more than seven days, if, as a result, more than
15% of the Fund's net assets (taken at current value) would then be
invested in securities described in (i), (ii), and (iii).

Schroder U.S. Diversified Growth Fund

Schroder U.S. Diversified Growth Fund will not:

Fundamental Policies:

1. Issue senior securities except that: (1) it may borrow money from a bank
on its promissory note or other evidence of indebtedness (any such
borrowing may not exceed one-third of the Fund's total assets after the
borrowing); (2) if at any time such borrowing exceeds such one-third
limitation, the Fund would within three days thereafter (not including
Sundays or holidays) or such longer period as the Securities and Exchange
Commission may prescribe by rules and regulations, reduce its borrowings
to the limitation; and (3) might or might not be secured and, if secured,
all or any part of the Fund's assets could be pledged. To comply with such
limitations, the Fund might be required to dispose of certain assets when
it might be disadvantageous to do so. Any such borrowings would be subject
to Federal Reserve Board regulations. (As a non-fundamental policy, the
Fund does not borrow for investment purposes.)

2. Effect short sales, purchase any security on margin or write or purchase
put and call options.
<PAGE>

3. Acquire more than 10% of the voting securities of any one issuer.

4. Invest 25% or more of the value of its total assets in any one industry.

5. Engage in the purchase and sale of illiquid interests in real estate,
including illiquid interests in real estate investment trusts.

6. Engage in the purchase and sale of commodities or commodity contracts.

7. Invest in companies for the purpose of exercising control or management.

8. Underwrite securities of other issuers, except that the Fund may acquire
portfolio securities, not in excess of 10% of the value of its total
assets, under circumstances where if sold it might be deemed to be an
underwriter for the purposes of the Securities Act of 1933, as amended.

9. Make loans to other persons except that it may purchase evidences of
indebtedness of a type distributed privately to financial institutions but
not in excess of 10% of the value of its total assets.

10. Acquire securities described in the two immediately preceding fundamental
policies which in the aggregate exceed 10% of the value of the Fund's
total assets.

11. Invest in other investment companies.

Non-Fundamental Policies:

1. Invest more than 10% of its total assets in illiquid securities, including
securities described in items 8 and 9 above and repurchase agreements
maturing more than seven days after they are entered into.

2. Engage in writing, buying or selling of stock index futures, options on
stock index futures, financial futures contracts or options thereon.

Schroder U.S. Smaller Companies Fund

Schroder U.S. Smaller Companies Fund will not:

Fundamental Policies:

1. Borrow money, except that the Fund may borrow from banks or by entering
into reverse repurchase agreements, provided that such borrowings do not
exceed 33 1/3% of the value of the Portfolio's total assets (computed
immediately after the borrowing).

2. Underwrite securities of other companies (except insofar as the Fund might
be deemed to be an underwriter in the resale of any securities held in its
portfolio).

3. Invest in commodities or commodity contracts (other than covered call
options, put and call options, stock index futures, and options on stock
index futures and broadly-based stock indices, all of which are referred
to as Hedging Instruments, which it may use as permitted by any of its
other fundamental policies, whether or not any such Hedging Instrument is
considered to be a commodity or a commodity contract).

4. Purchase securities on margin; however, the Fund may make margin deposits
in connection with any Hedging Instruments, which it may use as permitted
by any of its other fundamental policies.
<PAGE>

5. Purchase or write puts or calls except as permitted by any of its other
fundamental policies.

6. Lend money except in connection with the acquisition of that portion of
publicly-distributed debt securities which the Fund's investment policies
and restrictions permit it to purchase; the Fund may also make loans of
portfolio securities and enter into repurchase agreements.

7. Pledge, mortgage or hypothecate its assets to an extent greater than 10%
of the value of the total assets of the Fund; however, this does not
prohibit the escrow arrangements contemplated by the put and call
activities of the Fund or other collateral or margin arrangements in
connection with any of the Hedging Instruments, which it may use as
permitted by any of its other fundamental policies.

8. Invest in companies for the purpose of acquiring control or management
thereof.

9. Invest in interests in oil, gas or other mineral exploration or
development programs (but may purchase readily marketable securities of
companies which operate, invest in, or sponsor such programs).

10. Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.

Non-Fundamental Policy:

Schroder Micro Cap Fund

Schroder Micro Cap Fund will not:

Fundamental Policies:

1. Underwrite securities of other companies (except insofar as the Fund might
be deemed to be an underwriter in the resale of any securities held in its
portfolio).

2. Invest in commodities or commodity contracts (other than Hedging
Instruments, which it may use as permitted by any of its other fundamental
policies, whether or not any such Hedging Instrument is considered to be a
commodity or a commodity contract).

3. Purchase securities on margin; however, the Fund may make margin deposits
in connection with any Hedging Instruments, which it may use as permitted
by any of its other fundamental policies.

4. Purchase or write puts or calls except as permitted by any of its other
fundamental policies.

5. Lend money except in connection with the acquisition of that portion of
publicly-distributed debt securities that the Fund's investment policies
and restrictions permit it to purchase; the Fund may also make loans of
portfolio securities and enter into repurchase agreements.

6. Pledge, mortgage or hypothecate its assets to an extent greater than 10%
of the value of the total assets of the Fund; however, this does not
prohibit the escrow arrangements contemplated by the put and call
activities of the Fund or other collateral or margin arrangements in
connection with any of the Hedging Instruments, which it may use as
permitted by any of its other fundamental
<PAGE>

policies.

7. Invest in companies for the purpose of acquiring control or management
thereof, except that the Fund may invest in other investment companies to
the extent permitted under the Investment Company Act or by rule or
exemption thereunder.

8. Invest in interests in oil, gas or other mineral exploration or
development programs (but may purchase readily marketable securities of
companies that operate, invest in, or sponsor such programs).

9. Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.

Non-Fundamental Policy:

All percentage limitations on investments (other than limitations on borrowing
and illiquid securities) will apply at the time of investment and shall not be
considered violated unless an excess or deficiency occurs or exists immediately
after and as a result of such investment.

TRUSTEES AND OFFICERS

The Trustees of the Trust are responsible for the general oversight of the
Trust's business. Subject to such policies as the Trustees may determine,
Schroder Investment Management North America Inc. ("Schroder") furnishes a
continuing investment program for each Fund and makes investment decisions on
its behalf. Subject to the control of the Trustees, Schroder also manages the
Funds' other affairs and business.

The Trustees and executive officers of the Trust and their principal occupations
during the last five years are set forth below. The mailing address for each of
the officers and Trustees is 787 Seventh Avenue, New York, New York 10019.

(*) Nancy A. Curtin, Trustee and Chairman of the Trust. 42. Trustee and
Chairman, Schroder Capital Funds, Schroder Series Trust, and Schroder Series
Trust II. Director and Managing Director, Schroder. Vice Chairman and Director,
Schroder Fund Advisors Inc. Formerly, Director, Barings Asset Management.

David N. Dinkins, Trustee. 72. Trustee, Schroder Capital Funds, and
Schroder Series Trust. Professor, Columbia University School of International
and Public Affairs. Director, American Stock Exchange, Carver Federal Savings
Bank, Transderm Laboratory Corporation, and The Cosmetics Center, Inc. Formerly,
Mayor, City of New York.

John I. Howell, Trustee. 83. Trustee, Schroder Capital Funds, Schroder
Series Trust, and Schroder Series Trust II. Director, American International
Life Assurance Company of New York. Private consultant since 1987.

- --------
(*) Trustee who is an "interested person" (as defined in the Investment Company
Act) of the Trust, Schroder, or Schroder Fund Advisors Inc. (*) Trustee who is
an "interested person" (as defined in the Investment Company Act) of the Trust,
Schroder, or Schroder Fund Advisors Inc.

1
<PAGE>

Peter S. Knight, Trustee. 49. Trustee, Schroder Capital Funds, and
Schroder Series Trust. Partner, Wunder, Knight, Levine, Thelen & Forscey.
Director, Comsat Corp., Medicis Pharmaceutical Corp., and Whitman Education
Group, Inc. Formerly, Campaign Manager, Clinton/Gore '96.

Peter E. Guernsey, Trustee. 78. Trustee, Schroder Capital Funds, Schroder
Series Trust, and Schroder Series Trust II. Formerly, Senior Vice President,
Marsh & McLennan, Inc.

(*)Sharon L. Haugh, Trustee. 53. Trustee, Schroder Capital Funds, and
Schroder Series Trust. Director and Chairman, Schroder. Director and Chairman,
Schroder Fund Advisors Inc.

William L. Means, Trustee. 64. Trustee, Schroder Capital Funds, Schroder
Series Trust, and Schroder Series Trust II. Formerly, Chief Investment Officer,
Alaska Permanent Fund Corporation.

Clarence F. Michalis, Trustee. 78. Trustee, Schroder Capital Funds, and
Schroder Series Trust. Chairman of the Board of Directors, Josiah Macy, Jr.
Foundation.

Hermann C. Schwab, Trustee. 80. Trustee, Schroder Capital Funds, and
Schroder Series Trust. Trustee, St. Luke's/Roosevelt Hospital Center. Formerly,
consultant to Schroder Capital Management International Inc.

Alexandra Poe, President of the Trust. 39. First Vice President, Schroder.
Senior Vice President, Secretary and General Counsel, Schroder Fund Advisors,
Inc. President, Schroder Capital Funds and Schroder Series Trust. Assistant
Secretary, Schroder Series Trust II. Formerly, Attorney, Gordon , Altman,
Butowsky, Weitzen, Shalov & Wein and Vice President and Counsel, Citibank, N.A.

Mark J. Astley, Vice President of the Trust. 36. First Vice President,
Schroder. Formerly, employed by various affiliates of Schroder in various
positions in the investment research and portfolio management areas.

Robert G. Davy, Vice President of the Trust. 38. Director and Executive
Vice President, Schroder. Director, Schroder Investment Management North America
Limited. Formerly, employed by various affiliates of Schroder in various
positions in the investment research and portfolio management areas.

Margaret H. Douglas-Hamilton, Vice President of the Trust. 58. Senior Vice
President and General Counsel, Schroder U.S. Holdings, Inc. Director, Senior
Vice President and Secretary, Schroder.

Richard R. Foulkes, Vice President of the Trust. 54. Director and Deputy
Chairman, Schroder. Director and Executive Vice President of Schroder Investment
Management North America Limited.

Michael Perelstein, Vice President of the Trust. 44. Director and Senior
Investment Officer, Schroder. Formerly, Managing Director of MacKay - Shields
Financial Corp.

Catherine A. Mazza, Vice President of the Trust. 40. Director and Senior
Vice President, Schroder. Executive Vice President and Director, Schroder Fund
Advisors Inc. Vice President, Schroder Capital Funds, and Schroder Series Trust.
Formerly, Vice President, Alliance Capital Management L.P.

Jane P. Lucas, Vice President of the Trust. 38. Senior Vice President,
Schroder.

2
<PAGE>

Alan Mandel, Treasurer, Chief Financial Officer and Secretary of the
Trust. 42. Secretary or Clerk, Treasurer and Chief Financial Officer, Schroder
Capital Funds, Schroder Series Trust and Schroder Series Trust II. First Vice
President, Schroder. Formerly, Director of Mutual Fund Administration for
Salomon Brothers Asset Management, and prior thereto, Chief Financial Officer
and Vice President of Hyperion Capital Management.

John A. Troiano, Vice President of the Trust. 41 Director and Chief
Executive, Schroder. Formerly, employed by affiliates of Schroder in various
positions in the investment research and portfolio management areas.

Ira L. Unschuld, Vice President of the Trust. 34. Director and Senior Vice
President, Schroder.

Carin Muhlbaum, Assistant Secretary of the Trust. 37. Assistant Secretary,
Schroder Capital Funds and Assistant Clerk, Schroder Series Trust. Vice
President, Schroder. Formerly, an investment management attorney with Seward &
Kissel and prior thereto, with Gordon Altman Butowsky Weitzen Shalov & Wein.

Nicholas Rossi, Assistant Secretary of the Trust. 36. Assistant Secretary,
Schroder Capital Funds and Assistant Clerk, Schroder Series Trust. Associate,
Schroder. Assistant Vice President, Schroder Fund Advisors Inc. Formerly, Mutual
Fund Specialist, Wilkie Farr & Gallagher and Fund Administrator, Furman Selz
LLC.

Except as otherwise noted, the principal occupations of the Trustees and
officers for the last five years have been with the employers shown above,
although in some cases they have held different positions with such employers or
their affiliates.

Trustee Compensation

Trustees who are not "interested persons" (as defined in the Investment Company
Act) of the Trust, Schroder, or Schroder Fund Advisors Inc. ("Disinterested
Trustees") receive an annual retainer of $11,000 for their services as Trustees
of all open-end investment companies distributed by Schroder Fund Advisors Inc.
with the exception of Schroder Series Trust II, and $1,250 per meeting attended
in person or $500 per meeting attended by telephone. Members of an Audit
Committee for one or more of such investment companies receive an additional
$1,000 per year. Payment of the annual retainer is allocated among such
investment companies based on their relative net assets. Payments of meeting
fees are allocated only among those investment companies to which the meeting
relates.

The table below sets forth information regarding compensation paid for the
fiscal year ended October 31, 1999 to the Disinterested Trustees by the Trust
and other funds in the Schroder "Fund Complex" (as defined below).

Compensation Table

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(1) (2) (3)

Aggregate Total Compensation from
Name of Compensation Trust and Fund Complex
Trustee from Trust Paid to Trustees*
- ----------------------------------------------------------------------------------------
<S> <C> <C>
David N. Dinkins $7,267 $16,250
- ----------------------------------------------------------------------------------------
Peter E. Guernsey $7,570 $26,500
- ----------------------------------------------------------------------------------------
John I. Howell $9,426 $29,000
- ----------------------------------------------------------------------------------------
Peter S. Knight $7,570 $17,000
- ----------------------------------------------------------------------------------------
William L. Means** $7,570 $26,500
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Clarence F. Michalis $7,570 $17,000
- ----------------------------------------------------------------------------------------
Hermann C. Schwab $7,570 $17,000
- ----------------------------------------------------------------------------------------
</TABLE>

* The Total Compensation listed in column (3) for each Trustee
includes compensation for services as Trustee of the Trust, Schroder
Capital Funds ("SCF"), Schroder Capital Funds II ("SCF II"),
Schroder Series Trust ("SST"), and Schroder Series Trust II
(formerly Schroder Asian Growth Fund, Inc., "SST II"). The Trust,
SCF, SCF II, SST, and SST II are considered part of the same "Fund
Complex" for these purposes. SCF II ceased operations and was
substantially liquidated in July 1999.

** Mr. Means was elected Trustee of the Trust on December 15, 1998.

The Trust's Trust Instrument provides that the Trust will indemnify its Trustees
and officers against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, except if it is determined in the manner specified in the Trust
Instrument that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust or that such
indemnification would relieve any officer or Trustee of any liability to the
Trust or its shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of his or her duties. The Trust, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.

SCHRODER AND ITS AFFILIATES

Schroder (together with its predecessors) has served as the investment adviser
for each of the Funds since their inception. Schroder is a wholly owned
subsidiary of Schroder U.S. Holdings Inc., which currently engages through its
subsidiary firms in the investment banking, asset management, and securities
businesses. Affiliates of Schroder U.S. Holdings Inc. (or their predecessors)
have been investment managers since 1927. Schroder U.S. Holdings Inc. is an
indirect, wholly owned U.S. subsidiary of Schroders plc, a publicly owned
holding company organized under the laws of England. Schroders plc and its
affiliates currently engage in the investment banking and asset management
businesses, and as of June 30, 1999, had under management assets of
approximately $208 billion. Schroder's address is 787 Seventh Avenue, New York,
New York 10019.

In January 2000, Schroders plc agreed to sell its worldwide investment banking
business to Salomon Smith Barney. The transaction, which is expected to be
completed by May 2000, is subject to regulatory approvals and satisfaction of
closing conditions. Schroders plc will retain its asset management businesses.
Schroder Fund Advisors Inc., the Trust's principal underwriter, is a
wholly-owned subsidiary of Schroder Investment Management North America Inc.

INVESTMENT ADVISORY AGREEMENTS

Under Amended and Restated Investment Advisory Agreements (the "Advisory
Agreements") between the Trust and Schroder, Schroder, at its expense, provides
the Funds with investment advisory services and advises and assists the officers
of the Trust in taking such steps as are necessary or appropriate to carry out
the decisions of its Trustees regarding the conduct of business of the Trust and
each Fund.

Under the Advisory Agreements, Schroder is required to regularly provide the
Funds with investment research, advice, and supervision and furnishes
continuously investment programs consistent with the investment objectives and
policies of the various Funds, and determines, for the various Funds, what
securities shall be purchased, what securities shall be held or sold, and what
portion of a Fund's assets shall be held uninvested, subject always to the
provisions of the Trust's Trust Instrument and By-laws, and of the Investment
Company Act, and to a Fund's investment objectives, policies, and restrictions,
and subject further to such policies and instructions as the Trustees may from
time to time establish.
<PAGE>

Schroder makes available to the Trust, without additional expense to the Trust,
the services of such of its directors, officers, and employees as may duly be
elected Trustees or officers of the Trust, subject to their individual consent
to serve and to any limitations imposed by law. Schroder pays the compensation
and expenses of officers and executive employees of the Trust. Schroder also
provides investment advisory research and statistical facilities and all
clerical services relating to such research, statistical, and investment work.
Schroder pays the Trust's office rent.

Under the Advisory Agreements, the Trust is responsible for all its other
expenses, including clerical salaries not related to investment activities; fees
and expenses incurred in connection with membership in investment company
organizations; brokers' commissions; payment for portfolio pricing services to a
pricing agent, if any; legal expenses; auditing expenses; accounting expenses;
taxes and governmental fees; fees and expenses of the transfer agent and
investor servicing agent of the Trust; the cost of preparing share certificates
or any other expenses, including clerical expenses, incurred in connection with
the issue, sale, underwriting, redemption, or repurchase of shares; the expenses
of and fees for registering or qualifying securities for sale; the fees and
expenses of the Trustees of the Trust who are not affiliated with Schroder; the
cost of preparing and distributing reports and notices to shareholders; public
and investor relations expenses; and fees and disbursements of custodians of the
Funds' assets. The Trust is also responsible for its expenses incurred in
connection with litigation, proceedings, and claims and the legal obligation it
may have to indemnify its officers and Trustees with respect thereto.

Schroder's compensation under the Advisory Agreements may be reduced in any year
if a Fund's expenses exceed the limits on investment company expenses imposed by
any statute or regulatory authority of any jurisdiction in which shares of the
Fund are qualified for offer or sale.

The Advisory Agreements provide that Schroder shall not be subject to any
liability for any error of judgment or mistake of law or for any loss suffered
by the Trust in connection with rendering service to the Trust in the absence of
willful misfeasance, bad faith, gross negligence, or reckless disregard of its
duties.

The Advisory Agreements may be terminated without penalty by vote of the
Trustees as to any Fund, by the shareholders of that Fund, or by Schroder on 60
days' written notice. Each Advisory Agreement also terminates without payment of
any penalty in the event of its assignment. In addition, each Advisory Agreement
may be amended only by a vote of the shareholders of the affected Fund(s), and
each Advisory Agreement provides that it will continue in effect from year to
year only so long as such continuance is approved at least annually with respect
to a Fund by vote of either the Trustees or the shareholders of the Fund, and,
in either case, by a majority of the Trustees who are not "interested persons"
of Schroder. In each of the foregoing cases, the vote of the shareholders is the
affirmative vote of a "majority of the outstanding voting securities" as defined
in the Investment Company Act.

Subject to the discretion and control of Schroder, Schroder Investment
Management International Limited ("SIMIL"), an affiliate of Schroder, serves as
subadviser to Schroder International Smaller Companies Fund pursuant to an
Investment Subadvisory Agreement among Schroder, SIMIL, and the Fund.

The Former Related Portfolios. Prior to June 1, 1999 (or September 20, 1999 with
respect to Schroder Emerging Markets Fund), each Fund (other than Schroder U.S.
Diversified Growth Fund, Schroder Greater China Fund, and Schroder Micro Cap
Fund) invested all of its assets in a related portfolio (each, a "Former Related
Portfolio" and collectively the "Former Related Portfolios") having the same
investment objectives and substantially the same investment policies as the
relevant Fund. As long as a Fund remained completely invested in a portfolio (or
any other investment company), Schroder was not entitled to receive any
investment advisory fee from the Fund.

Schroder was the investment advisor to each of the Former Related Portfolios
pursuant to investment advisory agreements (each a "Portfolio Advisory
Agreement") between Schroder and Schroder Capital Funds, on behalf of the Former
Related Portfolio. Schroder received an investment advisory fee with respect to
each Former Related Portfolio. Each Portfolio Advisory Agreement was the same in
all material respects as the Advisory Agreements, except that the annual
advisory fee payable to Schroder by the
<PAGE>

Former Related Portfolio of Schroder International Fund was 0.45% of the
Portfolio's average daily net assets and the annual advisory fee payable to
Schroder by Schroder International Fund under its Advisory Agreement is 0.50% up
to $100 million, 0.40% of the next $150 million, and 0.35% in excess of $250
million, with respect to the Fund's average daily net assets. Schroder has
contractually agreed that the annual advisory fee paid to it by Schroder
International Fund through October 31, 2000 will be limited to 0.45% of the
Fund's average daily net assets. Each of the Funds that invested in a Former
Related Portfolio bore a proportionate part of the investment advisory fees paid
by such portfolio (based on the percentage of that portfolio's assets
attributable to the Fund).

Recent Investment Advisory Fees. In June of 1999, Schroder Emerging Markets
Fund, Schroder U.S. Smaller Companies Fund, and Schroder Micro Cap Fund changed
their fiscal year end from May 31 to October 31. The following table sets forth
the investment advisory fees paid by each of these Funds during three most
recent fiscal years ended May 31, and for the period June 1, 1999 through
October 31, 1999. In the case of Schroder Emerging Markets Fund and Schroder
U.S. Smaller Companies Fund, these fees include fees paid indirectly through the
Former Related Portfolios (for periods through September 20, 1999 and May 31,
1999, respectively) and directly to Schroder (since September 20, 1999 and June
1, 1999, respectively). The fees listed in the following table reflect
reductions pursuant to expense limitations and/or fee waivers in effect during
such periods.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Investment
Advisory
Fees Paid Investment Investment Investment
for the Advisory Advisory Advisory
Period Fees Paid Fees Paid Fees Paid
6/1/99 for Fiscal for Fiscal for Fiscal
through Year Ended Year Ended Year Ended
Fund 10/31/99 5/31/99 5/31/98 5/31/97
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Schroder Emerging $0 $0 $2 N/A
Markets Fund
- -------------------------------------------------------------------------------------
Schroder U.S. Smaller $76,803 $350,140 $254,728 $49,878
Companies Fund
- -------------------------------------------------------------------------------------
Schroder Micro Cap Fund $49,655 $30,004 $0 N/A
- -------------------------------------------------------------------------------------
</TABLE>

The following table sets forth the investment advisory fees paid by each of the
remaining Funds during the three most recent fiscal years, including fees paid
indirectly through the Former Related Portfolios (for periods through May 31,
1999) and directly to Schroder (since June 1, 1999). The fees listed in the
following table reflect reductions pursuant to expense limitations and/or fee
waivers in effect during such periods.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Investment Investment Investment
Advisory Advisory Advisory
Fees Paid Fees Paid Fees Paid
for Fiscal for Fiscal for Fiscal
Year Ended Year Ended Year Ended
Fund 10/31/99 10/31/98 10/31/97
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Schroder International $565,892 $718,360 $844,215
Fund
- ----------------------------------------------------------------------
Schroder International $0 $0 $0
Smaller Companies Fund
- ----------------------------------------------------------------------
Schroder U.S. $42,491 $60,203 $90,466
Diversified Growth Fund
- ----------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S> <C> <C> <C>
Schroder Greater China $0 N/A N/A
Fund
- ----------------------------------------------------------------------
</TABLE>

Waived Fees. For the periods shown above, a portion of the advisory fees payable
to Schroder (including fees payable by the Former Related Portfolio) were waived
in the following amounts pursuant to expense limitations and/or fee waivers
observed by Schroder for the noted Fund during such periods.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Fees Waived
During the Fees Waived
Period Fees Waived Fees Waived During
6/1/99 During During Fiscal Year
through Fiscal Year Fiscal Year Ended
Fund 10/31/99 Ended 5/31/99 Ended 5/31/98 5/31/97
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Schroder Emerging $65,719 $10,953 $20 N/A
Markets Fund
- -----------------------------------------------------------------------------------
Schroder U.S. Smaller $29,847 $0 $0 $10,038
Companies Fund
- -----------------------------------------------------------------------------------
Schroder Micro Cap Fund $37,550 $72,211 $26,896 N/A
- -----------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Fees Waived Fees Waived Fees Waived
During During During
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
Fund 10/31/99 10/31/98 10/31/97
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Schroder International $73,657 $38,224 $47,444
Fund
- ----------------------------------------------------------------------
Schroder International $71,451 $51,558 $60,033
Smaller Companies Fund
- ----------------------------------------------------------------------
Schroder U.S. $60,451 $40,931 $28,422
Diversified Growth Fund
- ----------------------------------------------------------------------
Schroder Greater China $102,172 N/A N/A
Fund
- ----------------------------------------------------------------------
</TABLE>

ADMINISTRATIVE SERVICES

On behalf of each Fund (except Schroder U.S. Diversified Growth Fund), the Trust
has entered into an administration agreement with Schroder Fund Advisors Inc.,
under which Schroder Fund Advisors Inc. provides management and administrative
services necessary for the operation of the Funds, including: (1) preparation of
shareholder reports and communications; (2) regulatory compliance, such as
reports to and filings with the SEC and state securities commissions; and (3)
general supervision of the operation of the Funds, including coordination of the
services performed by its investment adviser, transfer agent, custodian,
independent accountants, legal counsel and others. Schroder Fund Advisors Inc.
is a wholly owned subsidiary of Schroder and is a registered broker-dealer
organized to act as administrator and distributor of mutual funds.

For providing administrative services, Schroder Fund Advisors Inc. is entitled
to receive a monthly fee at
<PAGE>

the following annual rates (based upon each Fund's average daily net assets):
0.225% with respect to Schroder International Fund; and 0.25% with respect to
Schroder Emerging Markets Fund, Schroder International Smaller Companies Fund,
Schroder U.S. Smaller Companies Fund, Schroder Greater China Fund and Schroder
Micro Cap Fund. The administration agreement is terminable with respect to the
Funds without penalty, at any time, by the Trustees upon 60 days' written notice
to Schroder Fund Advisors Inc. or by Schroder Fund Advisors Inc. upon 60 days'
written notice to the Trust.

Effective June 1, 1999, the Trust entered into a subadministration agreement
with State Street Bank and Trust Company ("State Street"). Under that agreement,
the Trust, together with all mutual funds managed by Schroder and certain
related entities, pay fees to State Street based on the combined average daily
net assets of all the funds in the Schroder complex, according to the following
annual rates: 0.06% on the first $1.7 billion of such assets; 0.04% on the next
$1.7 billion of such assets; and 0.02% of such assets in excess of $3.4 billion,
subject to certain minimum charges. Each Fund pays its pro rata portion of such
expenses. The subadministration agreement is terminable with respect to the Fund
without penalty, at any time, by the Trust upon 60 days' written notice to State
Street or by State Street upon 60 days' written notice to the Trust. Prior to
June 1, 1999, Forum Administrative Services, LLC ("FAdS") provided certain
administrative services to the Funds according to a different fee schedule than
the schedule currently payable to Schroder Fund Advisors Inc. and State Street.

State Street also provides certain accounting services to the Trust. The Trust
compensates State Street on a basis approved by the Trustees.

Recent Administrative Fees. Prior to June 1, 1999, FAdS provided certain
administrative services to the Funds. During the three most recent fiscal years
(and the additional period listed for Schroder Emerging Markets Fund, Schroder
U.S. Smaller Companies Fund, and Schroder Micro Cap Fund, each of which changed
their fiscal year end from May 31 to October 31 in June of 1999) the Funds paid
the following fees to Schroder Fund Advisors Inc. and FAdS pursuant to the
administration agreements in place during such periods. The fees listed in the
following table reflect reductions pursuant to fee waivers and expense
limitations in effect during such periods.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Administration
Fees Paid for Administration Administration Administration
the Period Fees Paid for Fees Paid for Fees Paid
6/1/99 Fiscal Year Fiscal Year for Fiscal
through Ended 5/31/99 Ended 5/31/98 Year Ended
Fund 10/31/99 5/31/97
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Schroder Emerging Schroder Fund Schroder Fund Schroder Fund N/A
Markets Fund Advisors Advisors Advisors
Inc. $0 Inc. $0 Inc. $2

FAdS $847 FAdS $4
- ------------------------------------------------------------------------------------
Schroder U.S. Schroder Fund Schroder Fund Schroder Fund Schroder
Smaller Companies Advisors Advisors Advisors Inc. Fund
Fund Inc. $53,348 Inc. $139,898 $106,075 Advisors
Inc. $25,060

FAdS $41,969 FAdS $63,663 FAdS $15,007
- ------------------------------------------------------------------------------------
Schroder Micro Cap Schroder Fund Schroder Fund Schroder Fund N/A
Fund Advisors Inc. Advisors Advisors
$17,441 Inc. $20,443 Inc. N/A

FAdS $8,177 FAdS $2,152
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Administration
Fees Paid for Administration Administration
Fiscal Year Fees Paid for Fees Paid for
Ended Fiscal Year Fiscal Year
Fund 10/31/99 Ended 10/31/98 Ended 10/31/97
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Schroder Schroder Fund Schroder Fund Schroder Fund
International Fund Advisors Inc. Advisors Inc. Advisors Inc.
$199,346 $280,443 $348,301

FAdS $38,815 FAdS $210,164 FAdS $247,591
- -----------------------------------------------------------------------------
Schroder Schroder Fund Schroder Fund Schroder Fund
International Advisors Inc. Advisors Inc. $0 Advisors Inc. $0
Smaller Companies $0
Fund
FAdS $2,349 FAdS $9,085 FAdS $10,595
- -----------------------------------------------------------------------------
Schroder U.S. Schroder Fund Schroder Fund Schroder Fund
Diversified Growth Advisors Inc. Advisors Inc. $0 Advisors Inc. $0
Fund $0
FAdS $13,485 FAdS $15,853
FAdS $7,845
- -----------------------------------------------------------------------------
Schroder Greater Schroder Fund N/A N/A
China Fund Advisors Inc.
$0

FAdS $402
- -----------------------------------------------------------------------------
</TABLE>

DISTRIBUTOR

Pursuant to a Distribution Agreement with the Trust, Schroder Fund Advisors Inc.
(the "Distributor"), 787 Seventh Avenue, New York, New York 10019, serves as the
distributor for the Trust's continually offered shares. The Distributor pays all
of its own expenses in performing its obligations under the Distribution
Agreement. The Distributor is not obligated to sell any specific amount of
shares of any Fund. Please see "Schroder and its Affiliates" for ownership
information regarding the Distributor.

Distribution Plan for Advisor Shares. Each Fund has adopted a Distribution Plan
under Rule 12b-1 of the Investment Company Act pursuant to which the Fund may
pay the Distributor compensation in an amount limited in any fiscal year to the
annual rate of 0.50% (or, with respect to Schroder Greater China Fund, 0.25%) of
the Fund's average daily net assets attributable to Advisor Shares. The Trustees
have not authorized any payments under the Distribution Plans, although they may
at any time authorize payments at an annual rate of up to 0.50% (or, with
respect to Greater China Fund, 0.25%) of a Fund's average daily net assets
attributable to Advisor Shares. The Distribution Plans also relate to payments
made pursuant to the Trust's Shareholder Servicing Plan for Advisor Shares
(which will not exceed the annual rate of 0.25% of a Fund's average daily net
assets attributable to the Advisor Shares), to the extent such payments may be
deemed to be primarily intended to result in the sale of a Fund's Advisor
Shares. See "Shareholder Servicing Plan for Advisor Shares" below.

The various costs and expenses that may be paid or reimbursed under the
Distribution Plans include advertising expenses, costs of printing prospectuses
and other materials to be given or sent to prospective investors, expenses of
sales employees or agents of the Distributor, including salary, commissions,
travel and related expenses in connection with the distribution of Advisor
Shares, payments to broker-dealers who advise shareholders regarding the
purchase, sale, or retention of Advisor Shares, and payments to banks, trust
companies, broker-dealers (other than the Distributor) or other financial
organizations.
<PAGE>

A Distribution Plan may not be amended to increase materially the amount of
distribution expenses permitted thereunder without the approval of a majority of
the outstanding Advisor Shares of the relevant Fund. Any other material
amendment to a Distribution Plan must be approved both by a majority of the
Trustees and a majority of those Trustees ("Qualified Trustees") who are not
"interested persons" (as defined in the Investment Company Act) of the Trust,
and who have no direct or indirect financial interest in the operation of the
Distribution Plan or in any related agreement, by vote cast in person at a
meeting called for the purpose. Each Distribution Plan will continue in effect
for successive one-year periods provided each such continuance is approved by a
majority of the Trustees and the Qualified Trustees by vote cast in person at a
meeting called for the purpose. Each Distribution Plan may be terminated at any
time by vote of a majority of the Qualified Trustees or by vote of a majority of
the Fund's outstanding Advisor Shares.

Shareholder Servicing Plan for Advisor Shares. Each Fund has also adopted a
Shareholder Servicing Plan (the "Service Plan") for its Advisor Shares (except
for Schroder Micro Cap Fund which does not offer Advisor Shares). Under the
Service Plan, each Fund pays fees to the Distributor at an annual rate of up to
0.25% of the average daily net assets of the Fund attributable to its Advisor
Shares. The Distributor may enter into shareholder service agreements with
Service Organizations pursuant to which the Service Organizations provide
administrative support services to their customers who are Fund shareholders.

In return for providing these support services, a Service Organization may
receive payments from the Distributor at a rate not exceeding 0.25% of the
average daily net assets of the Advisor Shares of each Fund for which the
Service Organization is the Service Organization of record. These administrative
services may include, but are not limited to, the following functions:
establishing and maintaining accounts and records relating to clients of the
Service Organization; answering shareholder inquiries regarding the manner in
which purchases, exchanges, and redemptions of Advisor Shares of the Trust may
be effected and other matters pertaining to the Trust's services; providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records; assisting shareholders in arranging for processing
purchase, exchange, and redemption transactions; arranging for the wiring of
funds; guaranteeing shareholder signatures in connection with redemption orders
and transfers and changes in shareholder-designated accounts; integrating
periodic statements with other customer transactions; and providing such other
related services as the shareholder may request. Some Service Organizations may
impose additional conditions or fees, such as requiring clients to invest more
than the minimum amounts required by the Trust for initial or subsequent
investments or charging a direct fee for services. Such fees would be in
addition to any amounts which might be paid to the Service Organization by the
Distributor. Please contact your Service Organization for details.

Schroder U.S. Smaller Companies Fund is the only Fund that has made payments
under the Service Plan to date. In June 1999, that Fund changed its fiscal year
end from May 31 to October 31. For the period June 1, 1999 through October 31,
1999, and for the fiscal years ended May 31, 1999, 1998, and 1997, the Fund paid
$5,209, $11,960, $4,871, and $70, respectively, to the Distributor under the
Service Plan. All such payments were, in turn, repaid by the Distributor to
Service Organizations.

BROKERAGE ALLOCATION AND OTHER PRACTICES

Schroder may place portfolio transactions with broker-dealers which furnish,
without cost, certain research, statistical, and quotation services of value to
Schroder and its affiliates in advising the Trust and other clients, provided
that it shall always seek best price and execution with respect to transactions.
Certain investments may be appropriate for the Trust and for other clients
advised by Schroder. Investment decisions for the Trust and other clients are
made with a view to achieving their respective investment objectives and after
consideration of such factors as their current holdings, availability of cash
for investment, and the size of their investments generally. Frequently, a
particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients of Schroder on the same
day. In such event, such transactions will be allocated among the clients in a
manner believed by
<PAGE>

Schroder to be equitable to each. In some cases, this procedure could have an
adverse effect on the price or amount of the securities purchased or sold by the
Trust. Purchase and sale orders for the Trust may be combined with those of
other clients of Schroder in the interest of achieving the most favorable net
results for the Trust.

Brokerage and Research Services. Transactions on U.S. stock exchanges and other
agency transactions involve the payment by the Trust of negotiated brokerage
commissions. Such commissions vary among different brokers. Also, a particular
broker may charge different commissions according to such factors as the
difficulty and size of the transaction. Transactions in foreign securities often
involve the payment of fixed brokerage commissions, which are generally higher
than those in the United States, and therefore certain portfolio transaction
costs may be higher than the costs for similar transactions executed on U.S.
securities exchanges. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid by the
Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.

Schroder places all orders for the purchase and sale of portfolio securities and
buys and sells securities through a substantial number of brokers and dealers.
In so doing, it uses its best efforts to obtain the best price and execution
available. In seeking the best price and execution, Schroder considers all
factors it deems relevant, including price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction (taking into account market prices and trends), the
reputation, experience, and financial stability of the broker-dealer involved,
and the quality of service rendered by the broker-dealer in other transactions.

It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive research, statistical, and quotation services from broker-dealers that
execute portfolio transactions for the clients of such advisers. Consistent with
this practice, Schroder receives research, statistical, and quotation services
from many broker-dealers with which it places the Trust's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities, and recommendations as
to the purchase and sale of securities. Some of these services are of value to
Schroder and its affiliates in advising various of their clients (including the
Trust), although not all of these services are necessarily useful and of value
in managing a Fund. The investment advisory fee paid by a Fund is not reduced
because Schroder and its affiliates receive such services.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, as amended
(the "Securities Exchange Act"), and by the Advisory Agreements, Schroder may
cause a Fund to pay a broker that provides brokerage and research services to
Schroder an amount of disclosed commission for effecting a securities
transaction for a Fund in excess of the commission which another broker would
have charged for effecting that transaction. Schroder's authority to cause a
Fund to pay any such greater commissions is also subject to such policies as the
Trustees may adopt from time to time.

To the extent permitted by law, the Funds may engage in brokerage transactions
with Schroder & Co. Inc. ("Schroder & Co."), which is an affiliate of Schroder,
or with unaffiliated brokers who trade or clear through Schroder & Co. or Lewco
Securities Corp. ("Lewco"), another affiliate of Schroder, to effect securities
transactions on U.S. exchanges, or Schroder Securities Limited and its
affiliates (collectively, "Schroder Securities"), affiliates of Schroder, to
effect securities transactions on various foreign securities exchanges on which
Schroder Securities has trading privileges. Consistent with regulations under
the Investment Company Act, the Funds have adopted procedures which are
reasonably designed to provide that any commissions or other remuneration the
Funds pay to any affiliated broker do not exceed the usual and customary
broker's commission. The procedures require periodic review of these
transactions by the Trustees. In addition, the Funds will adhere to the rule,
under the Securities Exchange Act, governing floor trading. This rule permits
the Funds to effect, but not execute, exchange listed securities transactions
with an affiliated broker that pays a portion of the brokerage commissions it
receives from a Fund to the brokers executing the transactions. Also, due to
securities law limitations, the Funds may be required to limit purchases of
securities in a public

<PAGE>

offering if Schroder & Co., Lewco, or Schroder Securities or one of their
affiliates is a member of the syndicate for that offering.

None of the Funds has any understanding or arrangement to direct any specific
portion of its brokerage to Schroder & Co., Lewco, or Schroder Securities, and
none will direct brokerage to Schroder & Co., Lewco, or Schroder Securities in
recognition of research services.

The following tables show the aggregate brokerage commissions paid for the three
most recent fiscal years (and the other periods shown) with respect to each Fund
that incurred brokerage costs. For each Fund that invested in a Former Related
Portfolio, the amounts listed represent aggregate brokerage commissions paid by
such Portfolio.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Brokerage
Commissions Brokerage Brokerage Brokerage
Paid During the Commissions Commissions Commissions Paid
Period 6/1/99 Paid During Paid During During Fiscal
through Fiscal Year Fiscal Year Year Ended
Fund 10/31/99(a) Ended 5/31/99 Ended 5/31/98 5/31/97
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Schroder Emerging $73,524 $149,918 $92,986 N/A
Markets Fund
- --------------------------------------------------------------------------------------------
Schroder U.S. $81,772 $1,069,409 $491,278 $167,043
Smaller Companies
Fund
- --------------------------------------------------------------------------------------------
Schroder Micro $44,541 $49,558 $11,185 $2,966(b)
Cap Fund
- --------------------------------------------------------------------------------------------
</TABLE>

(a) Effective October 31, 1999, each of these Funds changed its fiscal year
from May 31 to October 31.
(b) Period Ended November 30, 1997.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Brokerage Brokerage Brokerage
Commissions Commissions Paid Commissions Paid
Paid During During Fiscal During Fiscal
Fiscal Year Year Ended Year Ended
Fund Ended 10/31/99 10/31/98 10/31/97
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Schroder International Fund $424,870 $430,627 $421,129
- --------------------------------------------------------------------------------------
Schroder International $28,729 $25,266 $37,223
Smaller Companies Fund
- --------------------------------------------------------------------------------------
Schroder U.S. Diversified $18,215 $40,509 $20,510
Growth Fund
- --------------------------------------------------------------------------------------
Schroder Greater China Fund $11,898 N/A N/A
- --------------------------------------------------------------------------------------
</TABLE>

During their most recent fiscal years (and the other periods shown), the
total brokerage commissions paid by the Funds to brokers and dealers in
transactions identified for execution on the basis of research and other
services provided to the Funds are summarized below.
<PAGE>

(which amount represented
the following approximate %
Fund Commissions of the total brokerage
- ----- ----------- commissions paid by the
Fund during the period)
Schroder Emerging Markets Fund
(period 6/1/99 - 10/31/99)* $0 0%
(fiscal year ended 5/31/99) $0 0%

Schroder U.S. Smaller Companies Fund
(period 6/1/99 - 10/31/99)* $4,393.86 2.97%
(fiscal year ended 5/31/99) $148,179.50 7.26%

Schroder Micro Cap Fund
(period 6/1/99 - 10/31/99)* $0 0%
(fiscal year ended 5/31/99) $750 0.32%

Schroder International Fund $95,274.66 22.40%

Schroder International Smaller $94.03 0.30%
Companies Fund

Schroder U.S. Diversified Growth $0 0%
Fund
Schroder Greater China Fund $88.30 0.90%

* Effective October 31, 1999, each of these Funds changed its fiscal year
from May 31 to October 31.

The Funds paid no brokerage commissions to Schroder & Co., Lewco, or Schroder
Securities in the three most recent fiscal years.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each class of shares of each Fund is determined
daily as of the close of trading on the New York Stock Exchange (normally 4:00
p.m., Eastern Time) on each day the Exchange is open for trading.

The Trustees have established procedures for the valuation of a Fund's
securities, which are summarized as follows:

Equities listed or traded on a domestic or foreign stock exchange (including the
National Association of Securities Dealers' Automated Quotation System
("NASDAQ")) for which last sales information is regularly reported are valued at
their last reported sales prices on such exchange on that day or, in the absence
of sales that day, such securities are valued at the mean of closing bid and ask
prices ("mid-market price") or, if none, the last sales price on the preceding
trading day. (Where the securities are traded on more than one exchange, they
are valued on the exchange on which the security is primarily traded.)
Securities purchased in an initial public offering and which have not commenced
trading in a secondary market are valued at cost. Unlisted securities for which
over-the-counter market quotations are readily available generally are valued at
the most recently reported mid-market prices. Fixed income securities with
remaining maturities of more than 60 days are valued on the basis of valuations
provided by pricing services that determine valuations for normal institutional
size trading units of fixed income securities, or through obtaining independent
quotes from market makers. Short-term fixed income securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value, unless Schroder believes another valuation is more appropriate.
Securities for which current market quotations are not readily available are
valued at fair value pursuant to procedures established by the Trustees.
<PAGE>

All assets and liabilities of a Fund denominated in foreign currencies are
translated into U.S. dollars based on the mid-market price of such currencies
against the U.S. dollar at the time when last quoted.

Long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities and certain foreign securities may be stated at fair value on the
basis of valuations furnished by pricing services approved by the Trustees,
which determine valuations for normal, institutional-size trading units of such
securities using methods based on market transactions for comparable securities.

If any securities held by a Fund are restricted as to resale, Schroder will
obtain a valuation based on the current bid for the restricted security from one
or more independent dealers or other parties reasonably familiar with the facts
and circumstances of the security. If Schroder is unable to obtain a fair
valuation for a restricted security from an independent dealer or other
independent party, a pricing committee (comprised of certain directors and
officers at Schroder) shall determine the bid value of such security. The
valuation procedures applied in any specific instance are likely to vary from
case to case. However, consideration is generally given to the financial
position of the issuer and other fundamental analytical data relating to the
investment and to the nature of the restrictions on disposition of the
securities (including any registration expenses that might be borne by the Trust
in connection with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities, and any available
analysts' reports regarding the issuer.

Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of these securities used in determining the net
asset value of the Trust's shares are computed as of such times. Also, because
of the amount of time required to collect and process trading information as to
large numbers of securities issues, the values of certain securities (such as
convertible bonds and U.S. Government securities) are determined based on market
quotations collected earlier in the day at the latest practicable time prior to
the close of the Exchange. Occasionally, events affecting the value of such
securities may occur between such times and the close of the Exchange which will
not be reflected in the computation of the Trust's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value, in the manner described
above.

The proceeds received by each Fund for each issue or sale of its shares, and all
income, earnings, profits, and proceeds thereof, subject only to the rights of
creditors, will be specifically allocated to such Fund, and constitute the
underlying assets of that Fund. The underlying assets of each Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of such Fund and with a share of the general liabilities
of the Trust. Each Fund's assets will be further allocated among its constituent
classes of shares on the Trust's books of account. Expenses with respect to any
two or more Funds or classes may be allocated in proportion to the net asset
values of the respective Funds or classes except where allocations of direct
expenses can otherwise be fairly made to a specific Fund or class.

REDEMPTIONS IN KIND

The Trust had agreed to redeem shares of each Fund solely in cash up to the
lesser of $250,000 or 1% of the Fund's net assets during any 90-day period for
any one shareholder. In consideration of the best interests of the remaining
shareholders, the Trust may pay any redemption proceeds exceeding this amount in
whole or in part by a distribution in kind of securities held by a Fund in lieu
of cash. The Trust does not expect to redeem shares in kind under normal
circumstances. If your shares are redeemed in kind, you should expect to incur
transaction costs upon the disposition of the securities received in the
distribution.

TAXES
<PAGE>

Each Fund intends to qualify each year and elect to be taxed as a regulated
investment company under Subchapter M of the United States Internal Revenue Code
of 1986, as amended (the "Code").

As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, a Fund will not be subject to federal income tax
on any of its net investment income or net realized capital gains that are
distributed to shareholders.

In order to qualify as a "regulated investment company," a Fund must, among
other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies,
and (b) diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any issuer (other than U.S. Government securities).

If a Fund fails to distribute in a calendar year substantially all of its
ordinary income for such year and substantially all of its capital gain net
income for the one-year period ending October 31 (or later if a Fund is
permitted so to elect and so elects), plus any retained amount from the prior
year, that Fund will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by a Fund in January of a year generally is
deemed to have been paid by that Fund on December 31 of the preceding year, if
the dividend was declared and payable to shareholders of record on a date in
October, November, or December of that preceding year. Each Fund intends
generally to make distributions sufficient to avoid imposition of the 4% excise
tax. In order to receive the favorable tax treatment accorded regulated
investment companies and their shareholders, moreover, a Fund must in general
distribute with respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and, the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year.

A Fund's distributions will be taxable to you as ordinary income to the extent
derived from the Fund's investment income and net short-term gains (that is, net
gains from capital assets held for no more than one year). Distributions
designated by a Fund as deriving from net gains on capital assets held for more
than one year will be taxable to you as long-term capital gains (generally
subject to a 20% tax rate), regardless of how long you have held the shares.
Distributions will be taxable to you as described above whether received in cash
or in shares through the reinvestment of distributions. Early in each year the
Trust will notify each shareholder of the amount and tax status of distributions
paid to the shareholder by each of the Funds for the preceding year. Dividends
and distributions on a Fund's shares are generally subject to federal income tax
as described herein to the extent they do not exceed the Fund's realized income
and gains, even though such dividends and distributions may economically
represent a return of a particular shareholder's investment. Such distributions
are likely to occur in respect of shares purchased at a time when a Fund's net
asset value reflects gains that are either unrealized, or realized but not
distributed. Such realized gains may be required to be distributed even when a
Fund's net asset value also reflects unrealized losses.

Upon the disposition of shares of a Fund (whether by sale, exchange, or
redemption), a shareholder will realize a gain or loss. Such gain or loss will
be capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term or short-term generally depending upon the
shareholder's holding period for the shares. Long-term capital gains will
generally be taxed at a federal income tax rate of 20%. Any loss realized by a
shareholder on a disposition of shares held by the shareholder for six months or
less will be treated as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the shareholder with respect
to such shares. In general, any loss realized upon a taxable disposition of
shares will be treated as long-term capital loss if the shares have been held
for more than one year, and otherwise as short-term capital loss. In addition,
any loss realized on a sale or exchange of shares will be disallowed to the
extent that you replace the disposed of shares with shares of the same or
another Fund within a period of 61 days beginning 30 days before and ending 30
days after the date of disposition.
<PAGE>

With respect to investment income and gains received by a Fund from sources
outside the United States, such income and gains may be subject to foreign taxes
which are withheld at the source. The effective rate of foreign taxes in which a
Fund will be subject depends on the specific countries in which its assets will
be invested and the extent of the assets invested in each such country and,
therefore, cannot be determined in advance. In addition, a Fund's investments in
foreign securities or foreign currencies may increase or accelerate the Fund's
recognition of ordinary income and may affect the timing or amount of the Fund's
distributions. If a Fund is liable for foreign taxes, and if more than 50% of
the value of the Fund's total assets at the close of its taxable year consists
of stocks or securities of foreign corporations, the Fund may make an election
to permit its shareholders to claim a credit or deduction on their income tax
returns for their pro rata portion of qualified taxes paid by the Fund to
foreign countries. In such a case, shareholders would include in gross income
from foreign sources their pro rata share of such taxes. Shareholders then may
take a foreign tax credit against their U.S. federal income tax liability for
the amount of such foreign taxes or else deduct such foreign taxes as an
itemized deduction from gross income, subject to certain limitations (including,
with respect to a foreign tax credit, a holding period requirement).

If a Fund engages in hedging transactions, including hedging transactions in
options, futures contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale,
mark-to-market, straddle, wash sale, and short sale rules), the effect of which
may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, or convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to
shareholders. Each Fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best interests of the
Fund.

Under federal income tax law, a portion of the difference between the purchase
price of zero-coupon securities in which a Fund has invested and their face
value ("original issue discount") is considered to be income to the Fund each
year, even though the Fund will not receive cash interest payments from these
securities. This original issue discount (imputed income) will comprise a part
of the net investment income of the Fund which must be distributed to
shareholders in order to maintain the qualification of the Fund as a regulated
investment company and to avoid federal income tax at the level of the Fund.

A Fund may be required to withhold 31% of certain of your dividends if you have
not provided the Fund with your correct taxpayer identification number (normally
your Social Security number), or if you are otherwise subject to back-up
withholding.

This discussion of the federal income tax and state tax treatment of the Trust
and its shareholders is based on the law as of the date of this SAI. The
foregoing is primarily a summary of certain federal tax consequences of
investing in the Fund. You should consult your tax advisor for more information
about your own tax situation, including possible state and local taxes.

PRINCIPAL HOLDERS OF SECURITIES

To the knowledge of the Trust, as of February 18, 2000, no other person owned
beneficially more than 25% of the outstanding voting securities of any Fund,
except as indicated on Appendix A hereto. These persons may be deemed to control
the noted Funds. The Trust is not aware of any other person that may control a
Fund.

To the knowledge of the Trust, as of February 18, 2000, the Trustees of the
Trust and the officers of the Trust, as a group, owned less than 1% of the
outstanding shares of either class of each Fund, except that the Trustees and
officers as a group owned approximately 17.60% of the outstanding shares of
Schroder Micro Cap Fund.

To the knowledge of the Trust, as of February 18, 2000, no other person owned or
record or beneficially more than 5% of the outstanding Investor or Advisor
Shares of a Fund other than as set forth on Appendix A to this Statement.
Because these shareholders hold a substantial number of shares, they may be able
to require that the Trust hold special shareholder meetings and may be able to
determine the outcome of any

<PAGE>

shareholder vote.

PERFORMANCE INFORMATION

Average annual total return of a class of shares of a Fund for one-, five-, and
ten-year periods (or for such shorter periods as shares of that class of shares
of the Fund have been offered) is determined by calculating the actual dollar
amount of investment return on a $1,000 investment in that class of shares at
the beginning of the period, and then calculating the annual compounded rate of
return which would produce that amount. Total return for a period of one year or
less is equal to the actual return during that period. Total return calculations
assume reinvestment of all Fund distributions at net asset value on their
respective reinvestment dates. Total return may be presented for other periods.

All performance data is based on past investment results and does not predict
future performance. Investment performance of a particular class of a Fund's
shares, which will vary, is based on many factors, including market conditions,
the composition of the Fund's portfolio, and the Fund's operating expenses
attributable to that class of shares. Investment performance also often reflects
the risks associated with a Fund's investment objectives and policies.
Quotations of yield or total return for any period when an expense limitation is
in effect will be greater than if the limitation had not been in effect. These
factors should be considered when comparing the investment results of a Fund's
shares to those of various classes of other mutual funds and other investment
vehicles. Performance for each Fund's shares may be compared to various indices.

The table on the next page sets forth the average annual total return of
Investor Shares of the Funds for the one-, five-, and ten-year periods (or for
such periods as a Fund has been in operation) ended October 31, 1999. The table
also sets forth average annual total return information for a Fund's Advisor
Shares, which includes estimated pro forma information based on the performance
of the Fund's Investor Shares for periods prior to the inception date of Advisor
Shares. Such prior performance has been recalculated to reflect the actual fees
and expenses attributable to Advisor Shares. BECAUSE THE EXPENSES ATTRIBUTABLE
TO A FUND'S ADVISOR SHARES ARE HIGHER THAN THOSE ATTRIBUTABLE TO ITS INVESTOR
SHARES, THE PERFORMANCE OF THE FUND'S ADVISOR SHARES WILL NORMALLY BE LESS THAN
THE PERFORMANCE OF ITS INVESTOR SHARES OVER THE SAME PERIOD.
<PAGE>

Average Annual Total Return for Annual Periods Ended October 31, 1999

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Since
Inception Inception Inception
of Fund Date of Date of
Fund Class 1 Year 5 Year 10 Year (Annualized) Fund Class
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Schroder Investor 66.19% N/A N/A 10.58% 10/31/97 10/31/97
Emerging Markets Shares
Fund
Advisor N/A N/A N/A N/A N/A
Shares
- -----------------------------------------------------------------------------------------------
Schroder U.S. Investor 8.91% % N/A 15.67% 8/06/93 8/06/93
Smaller Shares
Companies Fund
Advisor 8.69% 15.70% N/A 15.51% 12/23/96
Shares (1)
- -----------------------------------------------------------------------------------------------
Schroder Micro Investor 90.84% N/A N/A 68.70% 10/15/97 10/15/97
Cap Fund Shares
- -----------------------------------------------------------------------------------------------
Schroder Investor 21.82% 8.90% 8.50% 11.98% 12/19/85 12/19/85
International Shares
Fund
Advisor N/A N/A N/A N/A 1/21/98
Shares
- -----------------------------------------------------------------------------------------------
Schroder Investor 65.27% N/A N/A 18.10% 11/4/96 11/4/96
International Shares
Smaller
Companies Fund Advisor N/A N/A N/A N/A N/A
Shares
- -----------------------------------------------------------------------------------------------
Schroder U.S. Investor 30.95% 20.46% 16.02% 11.83% 10/31/70 10/31/70
Diversified Shares
Growth
Fund Advisor N/A N/A N/A N/A N/A
Shares
- -----------------------------------------------------------------------------------------------
Schroder Greater Investor N/A N/A N/A 27.20% 1/4/99 1/4/99
China Fund Shares

Adviser N/A N/A N/A N/A N/A
Shares
- -----------------------------------------------------------------------------------------------
</TABLE>

(1) Total return for Advisor Shares of Schroder U.S. Smaller Companies Fund
reflects pro forma information (based on Investor Share performance)
through December 22, 1996, and actual total return from December 23, 1996
(the inception date of Advisor Shares of the Fund) through October 31,
1999. The actual annualized total return of Advisor Shares of the Fund
from December 23, 1996 through October 31, 1999 was 5.70%.

<PAGE>

From time to time, Schroder, State Street or any of their affiliates that
provide services to the Fund may reduce their compensation or assume expenses of
a Fund in order to reduce the Fund's expenses, as described in the Trust's
current Prospectuses. Any such waiver or assumption would increase a Fund's
total return for each class of shares during the period of the waiver or
assumption.

CUSTODIAN

State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, is the custodian of the assets of each Fund. The custodian's
responsibilities include safeguarding and controlling a Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on a Fund's investments. The custodian does not determine
the investment policies of a Fund or decide which securities a Fund will buy or
sell.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Boston Financial Data Services, Inc., 66 Brooks Drive, Braintree, Massachusetts
02184, is the Trust's registrar, transfer agent and dividend disbursing agent.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, the Trust's independent accountants, provide audit
services, and tax return preparation services. Their address is One Post Office
Square, Boston, Massachusetts 02109.

LEGAL COUNSEL

Ropes & Gray, One International Place, Boston, Massachusetts 02110-2624, serves
as counsel to the Trust.

SHAREHOLDER LIABILITY

Under Delaware law, shareholders could, under certain circumstances, be held
personally liable for the obligations of the Trust. However, the Trust's Trust
Instrument disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees.
The Trust's Trust Instrument provides for indemnification out of a Fund's
property for all loss and expense of any shareholder held personally liable for
the obligations of a Fund. Thus the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which a
Fund would be unable to meet its obligations.

FINANCIAL STATEMENTS

The Reports of Independent Accountants, financial highlights, and financial
statements in respect of each Fund are included in the Trust's Annual Report to
Shareholders for the fiscal year ended October 31, 1999 on Form N-30D under the
Investment Company Act, filed electronically with the Securities and Exchange
Commission on December 30, 1999, (File No. 811-1911; Accession No.
0000912057-99-011065). That information is incorporated by reference into this
Statement of Additional Information.
<PAGE>

APPENDIX A

HOLDERS OF OUTSTANDING SHARES

To the knowledge of the Trust, as of February 18, 2000, no other person owned of
record or beneficially 5% or more of the outstanding Investor or Advisor Shares
of any Fund, except as set forth below.

- --------------------------------------------------------------------------------
Class Percentage of Outstanding
----- Shares of Class Owned
Record or Beneficial Owner --------------
- --------------------------
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
BALSA & Co. Investor 9.50%
C/o Chase Manhattan Bank
PO Box 1768
Grand Central Station
New York NY 10163-1768
- --------------------------------------------------------------------------------
Charles Schwab & Co Inc. Investor 7.15%
Special Cust AC BOC
Attn: Mutual Funds
101 Montgomery Street
San Francisco CA 94104
- --------------------------------------------------------------------------------
First American Trust Co. Investor 56.38%
The FBO Managed Omnibus
Reinvest
421 N. Main Street
Santa Ana, CA 92701-4699
- --------------------------------------------------------------------------------
National Investors Services Advisor 6.10
Corp
For the Exclusive Benefit of
our Customers
55 Water Street
New York, NY 10041-0001
- --------------------------------------------------------------------------------
American Express Trust Co. Advisor 92.16
for the Benefit of American
Express Trust Retired
Service Plan
P.O. Box 534
Minneapolis MN 55440
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schroder International Fund

- --------------------------------------------------------------------------------
SeaAlaska Corporation Investor 17.44%
Permanent Fund
Attn: Barbara A.
Searls/Patrick Duke
1 SeaAlaska Plaza, Suite 400
Juneau, AK 99801-1245
- --------------------------------------------------------------------------------
Mac & Co. Investor 16.30%
Mutual Fund Operations
PO Box 3198
Pittsburgh PA 15230-3198
- --------------------------------------------------------------------------------

A-
<PAGE>

- --------------------------------------------------------------------------------
State Street Bank Custodian Investor 14.34%
for Union College
C/O Specialized Trust
Services
200 Newport Avenue
North Quincy, MA 02171-2145
- --------------------------------------------------------------------------------
Norwest Bank Minnesota NA Investor 9.49%
FBO Norwest Foundation NIM
P.O. Box 1533
Minneapolis, MN 55480-1533
- --------------------------------------------------------------------------------
Northern Trust Company, Investor 15.23%
Trustee
FBO Paine Webber
P.O. Box 92956
Chicago, IL 60675-2956
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Fund
- --------------------------------------------------------------------------------
Schroder Investment Investor 35.82%
Management
Client Account
33 Gutter Lane
London EC2V 8AS
United Kingdom
- --------------------------------------------------------------------------------
Charles Schwab & Co Inc. Investor 39.27%
Special Customer Account
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
Hudson-Webber Foundation Investor 13.82%
333 West Fort Street, Suite 1310
Detroit, MI 48226-3149
- --------------------------------------------------------------------------------
National Investors Services Corp. Investor 5.52%
55 Water Street
New York, NY 10041-0098
- --------------------------------------------------------------------------------
Schroder U.S. Diversified Growth Fund
- --------------------------------------------------------------------------------
Wendel & Co. A/C 178075 Investor 11.78%
c/o The Bank of New York
Mutual Fund/Reorg. Dept.
PO Box 1066
Wall Street Station
New York NY 10268
- --------------------------------------------------------------------------------
Security Nominees Inc. Investor 8.80%
1 State Street
New York NY 10004-1417
- --------------------------------------------------------------------------------
Fox & Co. Investor 6.35%
PO Box 976
New York NY 10268-0976
- --------------------------------------------------------------------------------
Wendel & Co. A/C 056391 Investor 5.78%
c/o The Bank of New York
Mutual Fund/Reorg. Dept.
PO Box 1066
Wall Street Station
New York NY 10268
- --------------------------------------------------------------------------------

Schroder Emerging Markets Fund

A-
<PAGE>

- --------------------------------------------------------------------------------
State Street Bank Successor Investor 25.46
Trustee
Attn: Yvonne Lee
Defined Contribution Services
105 Rosemont Road, # Wesin
Westwood, MA 02090-2318
- --------------------------------------------------------------------------------
Charles Schwab & Co. Inc. Investor 15.10
Special Cust Account FBO
Attn: Mutual Funds
101 Montgomery Street
San Francisco CA 94104-4122
- --------------------------------------------------------------------------------
State Street Bank & Trust Investor 56.18
Co. Trustee
The Hallmark Cards Master Trust
105 Rosemont Avenue
Westwood, MA 02090-2318
- --------------------------------------------------------------------------------
Schroder Micro Cap Fund
- --------------------------------------------------------------------------------
Charles Schwab & Co. Inc. Investor 38.61%
Special Cust AC for the
Benefit of Customer
ATTN Mutual Funds
101 Montgomery Street
San Francisco CA 94104
- --------------------------------------------------------------------------------
Schroder Capital Management Investor 5.43
International Inc.
(Acct. No. 295779-5)
ATTN: Fergal Cassidy
787 7th Avenue, 34th Floor
New York NY 10019
- --------------------------------------------------------------------------------
Schroder Capital Management Investor 8.54
International Inc.
(Acct. No. 362506-8)
ATTN: Fergal Cassidy
787 7th Avenue, 34th Floor
New York NY 10019
- --------------------------------------------------------------------------------
Wexford Clearing Services Investor 9.47
Corp. FBO
Tom Juda Nancy Juda Co-Ttees
410 S. Lucerne Blvd.
Los Angeles, CA 90020-4749
- --------------------------------------------------------------------------------
Ira Unshold* Investor 17.52%
150 East 56th Street
New York, NY 10022
- --------------------------------------------------------------------------------
Schroder Greater China Fund
- --------------------------------------------------------------------------------
Schroder U.S. Holdings Inc. Investor 98.69
ATTN: Sharlene Louie
1633 Broadway, Floor 9
New York NY 10019-6708
- --------------------------------------------------------------------------------

*beneficial owner

A-
<PAGE>

APPENDIX B

RATINGS OF CORPORATE DEBT INSTRUMENTS

MOODY'S INVESTORS SERVICE INC. ("MOODY'S")

FIXED-INCOME SECURITY RATINGS

"Aaa" Fixed-income securities which are rated "Aaa" are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

"Aa" Fixed-income securities which are rated "Aa" are judged to be of high
quality by all standards. Together with the "Aaa" group they comprise what are
generally known as high grade fixed-income securities. They are rated lower than
the best fixed-income securities because margins of protection may not be as
large as in "Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.

"A" Fixed-income securities which are rated "A" possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.

"Baa" Fixed-income securities which are rated "Baa" are considered as medium
grade obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such fixed-income securities lack
outstanding investment characteristics and in fact have speculative
characteristics as well.

Fixed-income securities rated "Aaa", "Aa", "A" and "Baa" are considered
investment grade.

"Ba" Fixed-income securities which are rated "Ba" are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate, and
therefore not well safeguarded during both good and bad times in the future.
Uncertainty of position characterizes bonds in this class.

"B" Fixed-income securities which are rated "B" generally lack characteristics
of the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

"Caa" Fixed-income securities which are rated "Caa" are of poor standing. Such
issues may be in default or there may be present elements of danger with respect
to principal or interest.

"Ca" Fixed-income securities which are rated "Ca" present obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

"C" Fixed-income securities which are rated "C" are the lowest rated class of
fixed-income securities, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.

B-
<PAGE>

Rating Refinements: Moody"s may apply numerical modifiers, "1", "2", and
"3" in each generic rating classification from "Aa" through "B" in its municipal
fixed-income security rating system. The modifier "1" indicates that the
security ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and a modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. The ratings apply to Municipal Commercial Paper as well as taxable
Commercial Paper. Moody"s employs the following three designations, all judged
to be investment grade, to indicate the relative repayment capacity of rated
issuers: "Prime-1", "Prime-2", "Prime-3".

Issuers rated "Prime-1" have a superior capacity for repayment of
short-term promissory obligations. Issuers rated "Prime-2" have a strong
capacity for repayment of short-term promissory obligations; and Issuers rated
"Prime-3" have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated "Not Prime" do not fall within any of the Prime
rating categories.

STANDARD & POOR'S RATING SERVICES ("STANDARD & POOR'S")

FIXED-INCOME SECURITY RATINGS

A Standard & Poor's fixed-income security rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.

The ratings are based on current information furnished by the issuer or obtained
by Standard & Poor's from other sources it considers reliable. The ratings are
based, in varying degrees, on the following considerations: (1) likelihood of
default-capacity and willingness of the obligor as to the timely payment of
interest and repayment of principal in accordance with the terms of the
obligation; (2) nature of and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.

Standard & Poor"s does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability of,
such information, or for other reasons.

"AAA" Fixed-income securities rated "AAA" have the highest rating assigned by
Standard & Poor"s. Capacity to pay interest and repay principal is extremely
strong.

"AA" Fixed-income securities rated "AA" have a very strong capacity to pay
interest and repay principal and differs from the highest-rated issues only in
small degree.

"A" Fixed-income securities rated "A" have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than fixed-income
securities in higher-rated categories.

"BBB" Fixed-income securities rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for fixed-income securities in this category than for
fixed-income securities in higher-rated categories.

B-
<PAGE>

Fixed-income securities rated "AAA", "AA", "A" and "BBB" are considered
investment grade.

"BB" Fixed-income securities rated "BB" have less near-term vulnerability to
default than other speculative grade fixed-income securities. However, it faces
major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity or willingness to
pay interest and repay principal.

"B" Fixed-income securities rated "B" have a greater vulnerability to default
but presently have the capacity to meet interest payments and principal
repayments. Adverse business, financial or economic conditions would likely
impair capacity or willingness to pay interest and repay principal.

"CCC" Fixed-income securities rated "CCC" have a current identifiable
vulnerability to default, and the obligor is dependent upon favorable business,
financial and economic conditions to meet timely payments of interest and
repayments of principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and repay
principal.

"CC" The rating "CC" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or implied "CCC" rating.

"C" The rating "C" is typically applied to fixed-income securities subordinated
to senior debt which is assigned an actual or implied "CCC-" rating.

"CI" The rating "CI" is reserved for fixed-income securities on which no
interest is being paid.

"NR" Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor"s does not rate a
particular type of obligation as a matter of policy.

Fixed-income securities rated "BB", "B", "CCC", "CC" and "C" are regarded as
having predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest degree of speculation. While such fixed-income securities will
likely have some quality and protective characteristics, these are out-weighed
by large uncertainties or major risk exposures to adverse conditions.

Plus (+) or minus (-): The rating from "AA" TO "CCC" may be modified by the
addition of a plus or minus sign to show relative standing with the major
ratings categories.

COMMERCIAL PAPER RATINGS

Standard & Poor"s commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard & Poor"s from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.

Issues assigned "A" ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
"1", "2", and "3" to indicate the relative degree of safety.

"A-1" Indicates that the degree of safety regarding timely payment is very
strong.

"A-2" Indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".

B-
<PAGE>

"A-3" Indicates a satisfactory capacity for timely payment. Obligations carrying
this designation are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher designations.

SCHRODER CAPITAL FUNDS (DELAWARE)

Schroder Emerging Markets Fund Institutional Portfolio

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION

March 1, 2000

This Statement of Additional Information (SAI) is not a prospectus and is only
authorized for distribution when accompanied or preceded by a Prospectus for
Schroder Emerging Markets Fund Institutional Portfolio, as amended or
supplemented from time to time. This SAI relates to the Fund's Investor Shares
and Advisor Shares. Investor Shares and Advisor Shares are offered through
separate Prospectuses, each dated March 1, 2000. This SAI contains information
which may be useful to investors but which is not included in the Prospectuses.
Investors may obtain free copies of the Prospectuses by calling the Trust at
800-464-3108.

Certain disclosure has been incorporated by reference into this SAI from the
Fund's annual report. For a free copy of the annual report, please call
800-464-3108.
<PAGE>

Table of Contents

TRUST HISTORY..................................................................1
FUND CLASSIFICATION............................................................1
CAPITALIZATION AND SHARE CLASSES...............................................1
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS......................2
INVESTMENT RESTRICTIONS.......................................................17
TRUSTEES AND OFFICERS.........................................................18
SCHRODER AND ITS AFFILIATES...................................................21
INVESTMENT ADVISORY AGREEMENT.................................................22
ADMINISTRATIVE SERVICES.......................................................24
DISTRIBUTOR...................................................................25
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................27
DETERMINATION OF NET ASSET VALUE..............................................29
REDEMPTIONS IN KIND...........................................................30
TAXES ........................................................................31
PRINCIPAL HOLDERS OF SECURITIES...............................................33
PERFORMANCE INFORMATION.......................................................34
CUSTODIAN.....................................................................35
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT..................................35
INDEPENDENT ACCOUNTANTS.......................................................35
LEGAL COUNSEL.................................................................36
SHAREHOLDER LIABILITY.........................................................36
FINANCIAL STATEMENTS..........................................................36
APPENDIX A - RATINGS OF CORPORATE DEBT INSTRUMENTS...........................A-1

i
<PAGE>

SCHRODER CAPITAL FUNDS (DELAWARE)

SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO

STATEMENT OF ADDITIONAL INFORMATION

TRUST HISTORY

Schroder Capital Funds (Delaware) was organized as a Maryland corporation
on July 30, 1969; reorganized on February 29, 1988 as Schroder Capital Funds,
Inc.; and reorganized as a Delaware business trust organized under the laws of
the State of Delaware on January 9, 1996. The Trust's Trust Instrument, which is
governed by Delaware law, is on file with the Secretary of State of the State of
Delaware. Schroder Investment Management North America Inc. ("Schroder") and its
corporate predecessors have served as investment adviser to the Trust since its
inception.

FUND CLASSIFICATION

The Trust currently offers shares of beneficial interest of eight series
with separate investment objectives and policies, one of which, Schroder
Emerging Markets Fund Institutional Portfolio (the "Fund"), is covered in this
SAI. The Fund is an open-end, management investment company under the Investment
Company Act of 1940, as amended (the "Investment Company Act"). Shares of the
Fund are offered pursuant to the Prospectuses and this SAI. The Fund is a
"non-diversified" investment company under the Investment Company Act, and
therefore may invest its assets in a more limited number of issuers than may
diversified investment companies. To the extent the Fund invests a significant
portion of its assets in the securities of a particular issuer, it will be
subject to an increased risk of loss if the market value of the issuer's
securities declines.

CAPITALIZATION AND SHARE CLASSES

The Trust has an unlimited number of shares of beneficial interest that
may, without shareholder approval, be divided into an unlimited number of series
of such shares, which, in turn, may be divided into an unlimited number of
classes of such shares. The Fund's shares are presently divided into two
classes, Investor Shares and Advisor Shares. Each class is offered through a
separate Prospectus. Unlike Investor Shares, Advisor Shares are currently
subject to shareholder service fees, so that the performance of the Fund's
Investor Shares will normally be more favorable than that of the Fund's Advisor
Shares over the same time period. The Fund may suspend the sale of shares at any
time.

Shares entitle their holders to one vote per share, with fractional shares
voting proportionally; however, a separate vote will be taken by the Fund or a
class of shares on matters affecting the Fund or class, as determined by the
Trustees. For example, a change in a fundamental investment policy for the Fund
would be voted upon only by shareholders of the Fund and a change to a
distribution plan relating to a particular class and requiring shareholder
approval would be voted upon only by shareholders of that class. Shares have
noncumulative voting rights. Although the Trust is not required to hold annual
meetings of its shareholders, shareholders have the right to call a meeting to
elect or remove Trustees or to take other actions as provided in the Trust
Instrument. Shares have no preemptive or subscription rights, and are
transferable. Shares are entitled to dividends as declared by the Trustees, and
if the Fund were liquidated, each class of shares of the

1
<PAGE>

Fund would receive the net assets of the Fund attributable to the class. Because
Investor and Advisor Shares are subject to different expenses, the Fund's
dividends and other distributions will normally differ between the two classes.

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS

In addition to the principal investment strategies and the principal risks
of the Fund described in the Prospectuses, the Fund may employ other investment
practices and may be subject to additional risks which are described below.
Unless a strategy or policy described below is specifically prohibited by the
investment restrictions listed in the Prospectuses, under "Investment
Restrictions" in this SAI, or by applicable law, the Fund may engage in each of
the practices described below.

Certain Derivative Instruments

Derivative instruments are financial instruments whose value depends upon,
or is derived from, the value of an underlying asset, such as a security, index
or currency. To the extent permitted under "Investment Restrictions" below and
in the Prospectuses, the Fund may engage in a variety of transactions involving
the use of derivative instruments, including options and futures contracts on
securities and securities indices and options on futures contracts. These
transactions may be used by the Fund for hedging purposes or, to the extent
permitted by applicable law, to increase its current return. The Fund may also
engage in derivative transactions involving foreign currencies. See "Foreign
Currency Transactions."

Options

The Fund may purchase and sell covered put and call options on its
portfolio securities to enhance investment performance and to protect against
changes in market prices.

Covered call options. The Fund may write covered call options on its
portfolio securities to realize a greater current return through the receipt of
premiums than it would realize on its securities alone. Such option transactions
may also be used as a limited form of hedging against a decline in the price of
securities owned by the Fund.

A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the underlying securities (or comparable
securities satisfying the cover requirements of the securities exchanges), or
has the right to acquire such securities through immediate conversion of
securities.

In return for the premium received when it writes a covered call option,
the Fund gives up some or all of the opportunity to profit from an increase in
the market price of the securities covering the call option during the life of
the option. The Fund retains the risk of loss should the price of such
securities decline. If the option expires unexercised, the Fund realizes a gain
equal to the premium, which may be offset by a decline in price of the
underlying security. If the option is exercised, the Fund realizes a gain or
loss equal to the difference between the Fund's cost for the underlying security
and the proceeds of the sale (exercise price minus commissions) plus the amount
of the premium.

2
<PAGE>

The Fund may terminate a call option that it has written before it expires
by entering into a closing purchase transaction. The Fund may enter into closing
purchase transactions in order to free itself to sell the underlying security or
to write another call on the security, realize a profit on a previously written
call option, or protect a security from being called in an unexpected market
rise. Any profits from a closing purchase transaction may be offset by a decline
in the value of the underlying security. Conversely, because increases in the
market price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from a closing purchase
transaction is likely to be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Fund.

Covered put options. The Fund may write covered put options in order to
enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Fund plans to purchase. A put option gives the holder the right to sell, and
obligates the writer to buy, a security at the exercise price at any time before
the expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.

In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, the Fund also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.

The Fund may terminate a put option that it has written before it expires
by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.

Purchasing put and call options. The Fund may also purchase put options to
protect portfolio holdings against a decline in market value. This protection
lasts for the life of the put option because the Fund, as a holder of the
option, may sell the underlying security at the exercise price regardless of any
decline in its market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs that the Fund must
pay. These costs will reduce any profit the Fund might have realized had it sold
the underlying security instead of buying the put option.

The Fund may purchase call options to hedge against an increase in the
price of securities that the Fund wants ultimately to buy. Such hedge protection
is provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.

The Fund may also purchase put and call options to enhance its current
return. The Fund may also buy and sell combinations of put and call options on
the same underlying security to earn additional income.

3
<PAGE>

Options on foreign securities. The Fund may purchase and sell options on
foreign securities if in Schroder's opinion the investment characteristics of
such options, including the risks of investing in such options, are consistent
with the Fund's investment objectives. It is expected that risks related to such
options will not differ materially from risks related to options on U.S.
securities. However, position limits and other rules of foreign exchanges may
differ from those in the U.S. In addition, options markets in some countries,
many of which are relatively new, may be less liquid than comparable markets in
the U.S.

Risks involved in the sale of options. Options transactions involve
certain risks, including the risks that Schroder will not forecast interest rate
or market movements correctly, that the Fund may be unable at times to close out
such positions, or that hedging transactions may not accomplish their purpose
because of imperfect market correlations. The successful use of these strategies
depends on the ability of Schroder to forecast market and interest rate
movements correctly.

An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. Although the Fund
will enter into an option position only if Schroder believes that a liquid
secondary market exists, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option or at any particular time. If
no secondary market were to exist, it would be impossible to enter into a
closing transaction to close out an option position. As a result, the Fund may
be forced to continue to hold, or to purchase at a fixed price, a security on
which it has sold an option at a time when Schroder believes it is inadvisable
to do so.

Higher than anticipated trading activity or order flow or other unforeseen
events might cause The Options Clearing Corporation or an exchange to institute
special trading procedures or restrictions that might restrict the Fund's use of
options. The exchanges have established limitations on the maximum number of
calls and puts of each class that may be held or written by an investor or group
of investors acting in concert. It is possible that the Fund and other clients
of Schroder may be considered such a group. These position limits may restrict
the Fund's ability to purchase or sell options on particular securities.

As described below, the Fund generally expects that its options
transactions will be conducted on recognized exchanges. In certain instances,
however, the Fund may purchase and sell options in the over-the-counter markets.
Options which are not traded on national securities exchanges may be closed out
only with the other party to the option transaction. For that reason, it may be
more difficult to close out over-the-counter options than exchange-traded
options. Options in the over-the-counter market may also involve the risk that
securities dealers participating in such transactions would be unable to meet
their obligations to the Fund. Furthermore, over-the-counter options are not
subject to the protection afforded purchasers of exchange-traded options by The
Options Clearing Corporation. The Fund will, however, engage in over-the-counter
options transactions only when appropriate exchange-traded options transactions
are unavailable and when, in the opinion of Schroder, the pricing mechanism and
liquidity of the over-the-counter markets are satisfactory and the participants
are responsible parties likely to meet their contractual obligations. The Fund
will treat over-the-counter options (and, in the case of options sold by the
Fund, the underlying securities held by the Fund) as illiquid investments as
required by applicable law.

Government regulations, particularly the requirements for qualification as
a "regulated investment company" under the United States Internal Revenue Code
of 1986, as amended, may also restrict the Fund's use of options.

4
<PAGE>

Futures Contracts

In order to hedge against the effects of adverse market changes, the Fund
may buy and sell futures contracts on U.S. Government securities and other debt
securities in which the Fund may invest, and on indices of debt securities. In
addition, the Fund may purchase and sell stock index futures to hedge against
changes in stock market prices. The Fund may also, to the extent permitted by
applicable law, buy and sell futures contracts and options on futures contracts
to increase the Fund's current return. All such futures and related options
will, as may be required by applicable law, be traded on exchanges that are
licensed and regulated by the Commodity Futures Trading Commission (the "CFTC").
Depending upon the change in the value of the underlying security or index when
the Fund enters into or terminates a futures contract, the Fund may realize a
gain or loss.

Futures on Debt Securities and Related Options. A futures contract on a
debt security is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- the Fund
will legally obligate itself to accept the future delivery of the underlying
security and pay the agreed price. By selling futures on debt securities --
assuming a "short" position -- it will legally obligate itself to make the
future delivery of the security against payment of the agreed price. Open
futures positions on debt securities will be valued at the most recent
settlement price, unless that price does not, in the judgment of persons acting
at the direction of the Trustees as to the valuation of the Fund's assets,
reflect the fair value of the contract, in which case the positions will be
valued by the Trustees or such persons.

Positions taken in the futures markets are not normally held to maturity,
but are instead liquidated through offsetting transactions that may result in a
profit or a loss. While futures positions taken by the Fund will usually be
liquidated in this manner, the Fund may instead make or take delivery of the
underlying securities whenever it appears economically advantageous to the Fund
to do so. A clearing corporation associated with the exchange on which futures
are traded assumes responsibility for such closing transactions and guarantees
that the Fund's sale and purchase obligations under closed-out positions will be
performed at the termination of the contract.

Hedging by use of futures on debt securities seeks to establish more
certainly than would otherwise be possible the effective rate of return on
portfolio securities. The Fund may, for example, take a "short" position in the
futures market by selling contracts for the future delivery of debt securities
held by the Fund (or securities having characteristics similar to those held by
the Fund) in order to hedge against an anticipated rise in interest rates that
would adversely affect the value of the Fund's portfolio securities. When
hedging of this character is successful, any depreciation in the value of
portfolio securities may substantially be offset by appreciation in the value of
the futures position.

On other occasions, the Fund may take a "long" position by purchasing
futures on debt securities. This would be done, for example, when the Fund
expects to purchase particular securities when it has the necessary cash, but
expects the rate of return available in the securities markets at that time to
be less favorable than rates currently available in the futures markets. If the
anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Fund of purchasing
the securities may be offset, at least to some extent, by the rise in the value
of the futures position taken in anticipation of the subsequent securities
purchase.

5
<PAGE>

Successful use by the Fund of futures contracts on debt securities is
subject to Schroder's ability to predict correctly movements in the direction of
interest rates and other factors affecting markets for debt securities. For
example, if the Fund has hedged against the possibility of an increase in
interest rates which would adversely affect the market prices of debt securities
held by it and the prices of such securities increase instead, the Fund will
lose part or all of the benefit of the increased value of its securities which
it has hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Fund has insufficient cash, it may have
to sell securities to meet daily maintenance margin requirements. The Fund may
have to sell securities at a time when it may be disadvantageous to do so.

The Fund may purchase and write put and call options on certain debt
futures contracts, as they become available. Such options are similar to options
on securities except that options on futures contracts give the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. The Fund
will be required to deposit initial margin and maintenance margin with respect
to put and call options on futures contracts written by it pursuant to brokers'
requirements, and, in addition, net option premiums received will be included as
initial margin deposits. See "Margin Payments" below. Compared to the purchase
or sale of futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options plus transactions costs. However, there
may be circumstances when the purchase of call or put options on a futures
contract would result in a loss to the Fund when the purchase or sale of the
futures contracts would not, such as when there is no movement in the prices of
debt securities. The writing of a put or call option on a futures contract
involves risks similar to those risks relating to the purchase or sale of
futures contracts.

Index Futures Contracts and Options. The Fund may invest in debt index
futures contracts and stock index futures contracts, and in related options. A
debt index futures contract is a contract to buy or sell units of a specified
debt index at a specified future date at a price agreed upon when the contract
is made. A unit is the current value of the index. A stock index futures
contract is a contract to buy or sell units of a stock index at a specified
future date at a price agreed upon when the contract is made. A unit is the
current value of the stock index.

Depending on the change in the value of the index between the time when
the Fund enters into and terminates an index futures transaction, the Fund may
realize a gain or loss. The following example illustrates generally the manner
in which index futures contracts operate. The Standard & Poor's 100 Stock Index
is composed of 100 selected common stocks, most of which are listed on the New
York Stock Exchange. The S&P 100 Index assigns relative weightings to the common
stocks included in the Index, and the Index fluctuates with changes in the
market values of those common stocks. In the case of the S&P 100 Index,
contracts are to buy or sell 100 units. Thus, if the value of the S&P 100 Index
were $180, one contract would be worth $18,000 (100 units x $180). The stock
index futures contract specifies that no delivery of the actual stocks making up
the index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract. For example, if the Fund enters into a futures contract to buy 100
units of the S&P 100 Index at a specified future date at a contract price of
$180 and the S&P 100 Index

6
<PAGE>

is at $184 on that future date, the Fund will gain $400 (100 units x gain of
$4). If the Fund enters into a futures contract to sell 100 units of the stock
index at a specified future date at a contract price of $180 and the S&P 100
Index is at $182 on that future date, the Fund will lose $200 (100 units x loss
of $2).

The Fund may purchase or sell futures contracts with respect to any
securities indices. Positions in index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.

In order to hedge the Fund's investments successfully using futures
contracts and related options, the Fund must invest in futures contracts with
respect to indices or sub-indices the movements of which will, in Schroder's
judgment, have a significant correlation with movements in the prices of the
Fund's portfolio securities.

Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the holder would assume the underlying futures
position and would receive a variation margin payment of cash or securities
approximating the increase in the value of the holder's option position. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash based on the difference
between the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.

As an alternative to purchasing and selling call and put options on index
futures contracts, the Fund may purchase and sell call and put options on the
underlying indices themselves to the extent that such options are traded on
national securities exchanges. Index options are similar to options on
individual securities in that the purchaser of an index option acquires the
right to buy (in the case of a call) or sell (in the case of a put), and the
writer undertakes the obligation to sell or buy (as the case may be), units of
an index at a stated exercise price during the term of the option. Instead of
giving the right to take or make actual delivery of securities, the holder of an
index option has the right to receive a cash "exercise settlement amount". This
amount is equal to the amount by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of the exercise, multiplied by
a fixed "index multiplier".

The Fund may purchase or sell options on stock indices in order to close
out its outstanding positions in options on stock indices which it has
purchased. The Fund may also allow such options to expire unexercised.

Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to the Fund because
the maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
those risks relating to the purchase or sale of index futures contracts.

The Fund may also purchase warrants, issued by banks and other financial
institutions, whose values are based on the values from time to time of one or
more securities indices.

7
<PAGE>

Margin Payments. When the Fund purchases or sells a futures contract, it
is required to deposit with its custodian an amount of cash, U.S. Treasury
bills, or other permissible collateral equal to a small percentage of the amount
of the futures contract. This amount is known as "initial margin". The nature of
initial margin is different from that of margin in security transactions in that
it does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to the Fund upon termination of the contract, assuming the Fund satisfies its
contractual obligations.

Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when the Fund sells a futures contract and the price of the
underlying debt security rises above the delivery price, the Fund's position
declines in value. The Fund then pays the broker a variation margin payment
equal to the difference between the delivery price of the futures contract and
the market price of the securities underlying the futures contract. Conversely,
if the price of the underlying security falls below the delivery price of the
contract, the Fund's futures position increases in value. The broker then must
make a variation margin payment equal to the difference between the delivery
price of the futures contract and the market price of the securities underlying
the futures contract.

When the Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.

Special Risks of Transactions in Futures Contracts and Related Options

Liquidity Risks. Positions in futures contracts may be closed out only on
an exchange or board of trade which provides a secondary market for such
futures. Although the Fund intends to purchase or sell futures only on exchanges
or boards of trade where there appears to be an active secondary market, there
is no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular time. If there is
not a liquid secondary market at a particular time, it may not be possible to
close a futures position at such time and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, in the event financial futures are used to hedge
portfolio securities, such securities will not generally be sold until the
financial futures can be terminated. In such circumstances, an increase in the
price of the portfolio securities, if any, may partially or completely offset
losses on the financial futures.

In addition to the risks that apply to all options transactions, there are
several special risks relating to options on futures contracts. The ability to
establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
such a market will develop. Although the Fund generally will purchase only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options with the result that the Fund would have to exercise the options
in order to realize any profit.

8
<PAGE>

Hedging Risks. There are several risks in connection with the use by the
Fund of futures contracts and related options as a hedging device. One risk
arises because of the imperfect correlation between movements in the prices of
the futures contracts and options and movements in the underlying securities or
index or in the prices of the Fund's securities which are the subject of a
hedge. Schroder will, however, attempt to reduce this risk by purchasing and
selling, to the extent possible, futures contracts and related options on
securities and indices the movements of which will, in its judgment, correlate
closely with movements in the prices of the underlying securities or index and
the Fund's portfolio securities sought to be hedged.

Successful use of futures contracts and options by the Fund for hedging
purposes is also subject to Schroder's ability to predict correctly movements in
the direction of the market. It is possible that, where the Fund has purchased
puts on futures contracts to hedge its portfolio against a decline in the
market, the securities or index on which the puts are purchased may increase in
value and the value of securities held in the portfolio may decline. If this
occurred, the Fund would lose money on the puts and also experience a decline in
value in its portfolio securities. In addition, the prices of futures, for a
number of reasons, may not correlate perfectly with movements in the underlying
securities or index due to certain market distortions. First, all participants
in the futures market are subject to margin deposit requirements. Such
requirements may cause investors to close futures contracts through offsetting
transactions which could distort the normal relationship between the underlying
security or index and futures markets. Second, the margin requirements in the
futures markets are less onerous than margin requirements in the securities
markets in general, and as a result the futures markets may attract more
speculators than the securities markets do. Increased participation by
speculators in the futures markets may also cause temporary price distortions.
Due to the possibility of price distortion, even a correct forecast of general
market trends by Schroder may still not result in a successful hedging
transaction over a very short time period.

Lack of Availability. Because the markets for certain options and futures
contracts and other derivative instruments in which the Fund may invest
(including markets located in foreign countries) are relatively new and still
developing and may be subject to regulatory restraints, the Fund's ability to
engage in transactions using such instruments may be limited. Suitable
derivative transactions may not be available in all circumstances and there is
no assurance that the Fund will engage in such transactions at any time or from
time to time. The Fund's ability to engage in hedging transactions may also be
limited by certain regulatory and tax considerations.

Other Risks. The Fund will incur brokerage fees in connection with its
futures and options transactions. In addition, while futures contracts and
options on futures may be purchased and sold to reduce certain risks, those
transactions themselves entail certain other risks. Thus, while the Fund may
benefit from the use of futures and related options, unanticipated changes in
interest rates or stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. Moreover, in the event of an imperfect correlation
between the futures position and the portfolio position which is intended to be
protected, the desired protection may not be obtained and the Fund may be
exposed to risk of loss.

9
<PAGE>

Forward Commitments

The Fund may enter into contracts to purchase securities for a fixed price
at a future date beyond customary settlement time ("forward commitments") if the
Fund holds, and maintains until the settlement date in a segregated account,
cash or liquid securities in an amount sufficient to meet the purchase price, or
if the Fund enters into offsetting contracts for the forward sale of other
securities it owns. Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in the value of the Fund's other assets. Where such
purchases are made through dealers, the Fund relies on the dealer to consummate
the sale. The dealer's failure to do so may result in the loss to the Fund of an
advantageous yield or price.

Although the Fund will generally enter into forward commitments with the
intention of acquiring securities for its portfolio or for delivery pursuant to
options contracts it has entered into, the Fund may dispose of a commitment
prior to settlement if Schroder deems it appropriate to do so. The Fund may
realize short-term profits or losses upon the sale of forward commitments.

Repurchase Agreements

The Fund may enter into repurchase agreements. A repurchase agreement is a
contract under which the Fund acquires a security for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). It is the Fund's present intention
to enter into repurchase agreements only with member banks of the Federal
Reserve System and securities dealers meeting certain criteria as to
creditworthiness and financial condition, and only with respect to obligations
of the U.S. Government or its agencies or instrumentalities or other high
quality short-term debt obligations. Repurchase agreements may also be viewed as
loans made by the Fund which are collateralized by the securities subject to
repurchase. Schroder will monitor such transactions to ensure that the value of
the underlying securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. If the
seller defaults, the Fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of sale including accrued interest are
less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, the Fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the Fund is treated
as an unsecured creditor and required to return the underlying collateral to the
seller's estate.

When-Issued Securities

The Fund may from time to time purchase securities on a "when-issued"
basis. Debt securities are often issued on this basis. The price of such
securities, which may be expressed in yield terms, is fixed at the time a
commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase. During the period between purchase and
settlement, no payment is made by the Fund and no interest accrues to the Fund.
To the extent that assets of the Fund are held in cash pending the settlement of
a purchase of securities, the Fund would earn no income. While the Fund may sell
its right to acquire when-issued securities prior to the settlement date, the
Fund intends actually to acquire such securities unless a sale prior to
settlement appears desirable for investment reasons. At the time the Fund makes
the commitment to purchase a security on a when-issued basis,

10
<PAGE>

it will record the transaction and reflect the amount due and the value of the
security in determining the Fund's net asset value. The market value of the
when-issued securities may be more or less than the purchase price payable at
the settlement date. The Fund will establish a segregated account in which it
will maintain cash and U.S. Government securities or other liquid securities at
least equal in value to commitments for when-issued securities. Such segregated
securities either will mature or, if necessary, be sold on or before the
settlement date.

Loans of Fund Portfolio Securities

The Fund may lend its portfolio securities, provided: (1) the loan is
secured continuously by collateral consisting of U.S. Government securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Fund may at any time
call the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of the Fund's portfolio securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it is anticipated
that the Fund may share with the borrower some of the income received on the
collateral for the loan or that it will be paid a premium for the loan. Before
the Fund enters into a loan, Schroder considers all relevant facts and
circumstances, including the creditworthiness of the borrower. The risks in
lending portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Although voting rights or
rights to consent with respect to the loaned securities pass to the borrower,
the Fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The Fund will not lend portfolio securities
to borrowers affiliated with the Fund.

Foreign Securities

The Fund may invest without limit in securities principally traded in
foreign markets. The Fund may also invest without limit in Eurodollar
certificates of deposit and other certificates of deposit issued by United
States branches of foreign banks and foreign branches of United States banks.

Investments in foreign securities may involve risks and considerations
different from or in addition to investments in domestic securities. There may
be less information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those in
the United States. The securities of some foreign companies are less liquid and
at times more volatile than securities of comparable U.S. companies. Foreign
brokerage commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of the Fund's assets held abroad) and expenses not present in the
settlement of domestic investments. Also, because foreign securities are
normally denominated and traded in foreign currencies, the values of the Fund's
assets may be affected favorably or unfavorably by currency exchange rates and
exchange control regulations, and the Fund may incur costs in connection with
conversion between currencies.

In addition, with respect to certain foreign countries, there is a
possibility of nationalization or expropriation of assets, imposition of
currency exchange controls, adoption of foreign

11
<PAGE>

governmental restrictions affecting the payment of principal and interest,
imposition of withholding or confiscatory taxes, political or financial
instability, and adverse political, diplomatic or economic developments which
could affect the values of investments in those countries. In certain countries,
legal remedies available to investors may be more limited than those available
with respect to investments in the United States or other countries and it may
be more difficult to obtain and enforce a judgment against a foreign issuer.
Also, the laws of some foreign countries may limit the Fund's ability to invest
in securities of certain issuers located in those countries. Special tax
considerations apply to foreign securities.

In determining whether to invest in securities of foreign issuers,
Schroder will consider the likely impact of foreign taxes on the net yield
available to the Fund and its shareholders. Income received by the Fund from
sources within foreign countries may be reduced by withholding and other taxes
imposed by such countries. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. It is impossible to determine
the effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested in various countries is not known, and tax laws and their
interpretations may change from time to time and may change without advance
notice. Any such taxes paid by the Fund will reduce its net income available for
distribution to shareholders.

Emerging Market Securities

The Fund invests primarily in securities of companies determined by
Schroder to be "emerging market" issuers. The risks of investing in foreign
securities are particularly high when securities of issuers based in developing
or emerging market countries are involved. Investing in emerging market
countries involves certain risks not typically associated with investing in U.S.
securities, and imposes risks greater than, or in addition to, risks of
investing in foreign, developed countries. These risks include: greater risks of
nationalization or expropriation of assets or confiscatory taxation; currency
devaluations and other currency exchange rate fluctuations; greater social,
economic and political uncertainty and instability (including the risk of war);
more substantial government involvement in the economy; less government
supervision and regulation of the securities markets and participants in those
markets; controls on foreign investment and limitations on repatriation of
invested capital and on the Fund's ability to exchange local currencies for U.S.
dollars; unavailability of currency hedging techniques in certain emerging
market countries; the fact that companies in emerging market countries may be
smaller, less seasoned and newly organized companies; the difference in, or lack
of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the United
States; and greater price volatility, substantially less liquidity, and
significantly smaller market capitalization of securities markets. Also, any
change in the leadership or politics of emerging market countries, or the
countries that exercise a significant influence over those countries, may halt
the expansion of or reverse the liberalization of foreign investment policies
now occurring and adversely affect existing investment opportunities.

In addition, a number of emerging market countries restrict, to various
degrees, foreign investment in securities. Furthermore, high rates of inflation
and rapid fluctuations in inflation rates have had, and may continue to have,
negative effects on the economies and securities markets of certain emerging
market countries.

12
<PAGE>

Foreign Currency Transactions

The Fund may engage in currency exchange transactions to protect against
uncertainty in the level of future foreign currency exchange rates and to
increase current return. The Fund may engage in both "transaction hedging" and
"position hedging".

When it engages in transaction hedging, the Fund enters into foreign
currency transactions with respect to specific receivables or payables of the
Fund generally arising in connection with the purchase or sale of its portfolio
securities. The Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging, the Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.

The Fund may purchase or sell a foreign currency on a spot (or cash) basis
at the prevailing spot rate in connection with transaction hedging. The Fund may
also enter into contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign currency futures
contracts.

For transaction hedging purposes, the Fund may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Fund the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Fund the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives the Fund the right to assume a
long position in the futures contract until the expiration of the option. A call
option on currency gives the Fund the right to purchase a currency at the
exercise price until the expiration of the option. The Fund will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in Schroder's opinion, the pricing mechanism and
liquidity are satisfactory and the participants are responsible parties likely
to meet their contractual obligations.

When it engages in position hedging, the Fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which securities held by the Fund are denominated or are quoted in
their principal trading markets or an increase in the value of currency for
securities which the Fund expects to purchase. In connection with position
hedging, the Fund may purchase put or call options on foreign currency and
foreign currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. The Fund may also purchase or sell foreign currency
on a spot basis.

The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.

It is impossible to forecast with precision the market value of the Fund's
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for

13
<PAGE>

the Fund to purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of the security or securities
being hedged is less than the amount of foreign currency the Fund is obligated
to deliver and if a decision is made to sell the security or securities and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of the portfolio
security or securities of the Fund if the market value of such security or
securities exceeds the amount of foreign currency the Fund is obligated to
deliver.

To offset some of the costs to the Fund of hedging against fluctuations in
currency exchange rates, the Fund may write covered call options on those
currencies.

Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. Also, suitable foreign currency hedging transactions may not be
available in all circumstances and there can be no assurance that the Fund will
utilize hedging transactions at any time or from time to time.

The Fund may also seek to increase its current return by purchasing and
selling foreign currency on a spot basis, and by purchasing and selling options
on foreign currencies and on foreign currency futures contracts, and by
purchasing and selling foreign currency forward contracts.

Currency Forward and Futures Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.

Forward foreign currency exchange contracts differ from foreign currency
futures contracts in certain respects. For example, the maturity date of a
forward contract may be any fixed number of days from the date of the contract
agreed upon by the parties, rather than a predetermined date in a given month.
Forward contracts may be in any amounts agreed upon by the parties rather than
predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.

At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a

14
<PAGE>

clearing corporation associated with the exchange assumes responsibility for
closing out such contracts.

Positions in foreign currency futures contracts and related options may be
closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although the Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin on its futures positions.

Foreign Currency Options. Options on foreign currencies operate similarly
to options on securities, and are traded primarily in the over-the-counter
market, although options on foreign currencies have recently been listed on
several exchanges. Such options will be purchased or written only when Schroder
believes that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specific time. Options on foreign currencies are affected by all of those
factors which influence exchange rates and investments generally.

There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the U.S. options
markets.

Foreign Currency Conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.

15
<PAGE>

Warrants to Purchase Securities

The Fund may invest in warrants to purchase securities. Bonds issued with
warrants attached to purchase equity securities have many characteristics of
convertible bonds and their prices may, to some degree, reflect the performance
of the underlying stock. Bonds also may be issued with warrants attached to
purchase additional fixed income securities at the same coupon rate. A decline
in interest rates would permit the Fund to buy additional bonds at the favorable
rate or to sell the warrants at a profit. If interest rates rise, the warrants
would generally expire with no value.

Zero-Coupon Securities

Zero-coupon securities in which the Fund may invest are debt obligations
which are generally issued at a discount and payable in full at maturity, and
which do not provide for current payments of interest prior to maturity.
Zero-coupon securities usually trade at a deep discount from their face or par
value and are subject to greater market value fluctuations from changing
interest rates than debt obligations of comparable maturities which make current
distributions of interest. As a result, the net asset value of shares of the
Fund investing in zero-coupon securities may fluctuate over a greater range than
shares of other series of the Trust and other mutual funds investing in
securities making current distributions of interest and having similar
maturities. A Fund investing in zero-coupon bonds is required to distribute the
income on these securities as the income accrues, even though the Fund is not
receiving the income in cash on a current basis. Thus, the Fund may have to sell
other investments, including when it may not be advisable to do so, to make
income distributions.

Zero-coupon securities may include U.S. Treasury bills issued directly by
the U.S. Treasury or other short-term debt obligations, and longer-term bonds or
notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). CATS and TIGRS are not considered U.S. Government
securities. The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof.

In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, the Fund will be able to have its beneficial ownership of U.S.
Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidences
of ownership of the underlying U.S. Treasury securities.

16
<PAGE>

coupons may be sold separately. Typically, the coupons are sold separately or
grouped with other coupons with like maturity dates and sold in such bundled
form. Purchasers of stripped obligations acquire, in effect, discount
obligations that are economically identical to the zero-coupon securities issued
directly by the obligor.

Temporary Defensive Strategies

As described in the Prospectuses, Schroder may at times judge that
conditions in the securities markets make pursuing the Fund's basic investment
strategies inconsistent with the best interests of its shareholders and may
temporarily use alternate investment strategies primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing these
"defensive" strategies, the Fund would invest in high-quality debt securities,
cash, or money market instruments to any extent Schroder considers consistent
with such defensive strategies. It is impossible to predict when, or for how
long, the Fund will use these alternate strategies. One risk of taking such
temporary defensive positions is that the Fund may not achieve its investment
objective.

INVESTMENT RESTRICTIONS

The Trust has adopted the following fundamental and non-fundamental
investment restrictions for the Fund. The Fund's fundamental investment
restrictions may not be changed without the affirmative vote of a "majority of
the outstanding voting securities" of the Fund, which is defined in the
Investment Company Act to mean the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares and (2) 67% or more of the shares present at
a meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy. The non-fundamental investment policies described
in the Prospectuses and this SAI are not fundamental and may be changed by the
Trustees, without shareholder approval. The Fund will not:

1. Underwrite securities of other companies (except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities
held in its portfolio);

2. Invest in commodities or commodity contracts (other than hedging
instruments, which it may use as permitted by any of its other
fundamental policies, whether or not any such hedging instrument is
considered to be a commodity or a commodity contract);

3. Purchase securities on margin; however, the Fund may make margin
deposits in connection with any hedging instruments which it may use
as permitted by any of its other fundamental policies;

4. Purchase or write puts or calls except as permitted by any of its
other fundamental policies;

5. Lend money except in connection with the acquisition of debt
securities that the Fund's investment policies and restrictions
permit it to purchase. The Fund may make loans of portfolio
securities and enter into repurchase agreements;

6. As a non-fundamental policy, invest in or hold securities of any
issuer if officers or Trustees of the Trust or Schroder individually
owning more than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer;

17
<PAGE>

7. As a non-fundamental policy, invest more than 5% of the value of its
total assets in securities of issuers having a record, together with
predecessors, of less than three years of continuous operation;

8. Make short sales of securities;

9. Invest in interests in oil, gas or other mineral exploration or
development programs (but may purchase readily marketable securities
of companies which operate, invest in, or sponsor such programs);

10. Invest in real estate or in interests in real estate (but may
purchase readily marketable securities of companies holding real
estate or interests therein);

11. As a non-fundamental policy, the Fund will not invest more than 15%
of its assets in securities determined by Schroder to be illiquid.
Certain securities that are restricted as to resale may nonetheless
be resold by the Fund in accordance with Rule 144A under the
Securities Act of 1933, as amended. Such securities may be
determined by Schroder to be liquid for purposes of compliance with
the limitation on the Fund's investment in illiquid securities.

All percentage limitations on investments (other than limitations on
borrowing and illiquid securities) will apply at the time of investment and
shall not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.

TRUSTEES AND OFFICERS

The Trustees of the Trust are responsible for the general oversight of the
Trust's business. Subject to such policies as the Trustees may determine,
Schroder furnishes a continuing investment program for the Fund and makes
investment decisions on its behalf. Subject to the control of the Trustees,
Schroder also manages the Fund's other affairs and business.

The Trustees and executive officers of the Trust and their principal
occupations during the last five years are set forth below. The mailing address
of each of the officers and Trustees is 787 Seventh Avenue, New York, New York
10019.

(*) Nancy A. Curtin, Trustee and Chairman of the Trust. 42. Trustee and
Chairman, Schroder Capital Funds, Schroder Series Trust, and Schroder Series
Trust II. Managing Director, Schroder. Director, Schroder Investment Management
North America Limited. Vice Chairman and Director, Schroder Fund Advisors Inc.
Formerly, Director, Barings Asset Management.

- --------
(*) Trustee who is an "interested person" (as defined in the Investment Company
Act) of the Trust, Schroder, or Schroder Fund Advisors Inc.

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<PAGE>

Peter E. Guernsey, Trustee. 78. Trustee, Schroder Capital Funds, Schroder
Series Trust, and Schroder Series Trust II. Formerly, Senior Vice President,
Marsh & McLennan, Inc.

(*) Sharon L. Haugh, Trustee. 53. Trustee, Schroder Capital Funds, and
Schroder Series Trust. Director and Chairman, Schroder. Director and Chairman,
Schroder Fund Advisors Inc.

William L. Means, Trustee. 64. Trustee, Schroder Capital Funds, Schroder
Series Trust, and Schroder Series Trust II. Formerly, Chief Investment Officer,
Alaska Permanent Fund Corporation.

Clarence F. Michalis, Trustee. 78. Trustee, Schroder Capital Funds, and
Schroder Series Trust. Chairman of the Board of Directors, Josiah Macy, Jr.
Foundation.

Margaret H. Douglas-Hamilton, Vice President of the Trust. 58. Senior Vice
President and General Counsel, Schroder U.S. Holdings, Inc. Director, Senior
Vice President and Secretary, Schroder.

- --------
(*) Trustee who is an "interested person" (as defined in the Investment Company
Act) of the Trust, Schroder, or Schroder Fund Advisors Inc.

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<PAGE>

Richard R. Foulkes, Vice President of the Trust. 54. Director and Deputy
Chairman, Schroder. Director and Executive Vice President of Schroder Investment
Management North America Limited.

Michael Perelstein, Vice President of the Trust. 44. Director and Senior
Investment Officer, Schroder. Formerly, Managing Director of MacKay - Shields
Financial Corp.

Jane P. Lucas, Vice President of the Trust. 38. Senior Vice President,
Schroder.

Alan Mandel, Secretary, Treasurer, Chief Financial Officer and Secretary
of the Trust. 42. Secretary or Clerk, Treasurer and Chief Financial Officer,
Capital Funds, Schroder Series Trust and Schroder Series Trust II. First Vice
President, Schroder. Formerly, Director of Mutual Fund Administration for
Salomon Brothers Asset Management, and prior thereto, Chief Financial Officer
and Vice President of Hyperion Capital Management.

Ira L. Unschuld, Vice President of the Trust. 34. Director and Senior Vice
President, Schroder.

Trustee Compensation

Trustees who are not "interested persons" (as defined in the Investment
Company Act) of the Trust, Schroder, or Schroder Fund Advisors Inc.
("Disinterested Trustees") receive an annual retainer of $11,000 for their
services as Trustees of all open-end investment companies distributed by
Schroder Fund Advisors Inc. with the exception of Schroder Series Trust II, and
$1,250 per meeting attended in person or $500 per meeting attended by telephone.
Members of an Audit Committee for one or more of such investment companies
receive an additional $1,000 per year.

20
<PAGE>

Payment of the annual retainer is allocated among such investment companies
based on their relative net assets. Payments of meeting fees are allocated only
among those investment companies to which the meeting relates.

Compensation
Table
- ------------------------------------------------------------

(1) (2) (3)

Total Compensation
Aggregate from Trust and
Name of Compensation Fund Complex Paid
Trustee from Trust to Trustees*
- ------------------------------------------------------------
David N. Dinkins $7,267 $16,250
- ------------------------------------------------------------
Peter E. Guernsey $7,570 $26,500
- ------------------------------------------------------------
John I. Howell $9,426 $29,000
- ------------------------------------------------------------
Peter S. Knight $7,570 $17,000
- ------------------------------------------------------------
William L. Means** $7,570 $26,500
- ------------------------------------------------------------
Clarence F. Michalis $7,570 $17,000
- ------------------------------------------------------------
Hermann C. Schwab $7,570 $17,000
- ------------------------------------------------------------

* The Total Compensation listed in column (3) for each Trustee includes
compensation for services as a Trustee of the Trust, Schroder Capital Funds
("SCF"), Schroder Capital Funds II ("SCF II"), Schroder Series Trust ("SST"),
and Schroder Series Trust II ("SST II"). The Trust, SCF, SCF II, SST, and SST II
are considered part of the same "Fund Complex" for these purposes. SCF II ceased
operations and was substantially liquidated in July 1999.

** Mr. Means was elected Trustee of the Trust on December 15, 1998.

The Trust's Trust Instrument provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, except if it is determined in the manner specified in the Trust
Instrument that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust or that such
indemnification would relieve any officer or Trustee of any liability to the
Trust or its shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of his or her duties. The Trust, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.

SCHRODER AND ITS AFFILIATES

Schroder (together with its predecessors) has served as the investment
adviser for the Fund since its inception. Schroder is a wholly-owned subsidiary
of Schroder U.S. Holdings Inc., which engages through its subsidiary firms in
the investment banking, asset management, and securities businesses. Affiliates
of Schroder U.S. Holdings Inc. (or their predecessors) have been investment

21
<PAGE>

managers since 1927. Schroder U.S. Holdings Inc. is an indirect, wholly-owned
U.S. subsidiary of Schroders plc, a publicly owned holding company organized
under the laws of England. Schroders plc and its affiliates currently engage in
the investment banking and asset management businesses, and as of June 30, 1999,
had under management assets of approximately $208 billion. Schroder's address is
787 Seventh Avenue, New York, New York 10019.

Schroder Fund Advisors Inc., the Trust's principal underwriter, is a
wholly owned subsidiary of Schroder.

INVESTMENT ADVISORY AGREEMENT

Under an Amended and Restated Investment Advisory Agreement (the "Advisory
Agreement") between the Trust and Schroder (the "Advisory Agreement"), Schroder,
at its expense, provides the Fund with investment advisory services and advises
and assists the officers of the Trust in taking such steps as are necessary or
appropriate to carry out the decisions of its Trustees regarding the conduct of
business of the Trust and the Fund.

Under the Advisory Agreement, Schroder is required to regularly provide
the Fund with investment research, advice, and supervision and furnishes
continuously an investment program consistent with the investment objectives and
policies of the Fund, and determines, for the Fund, what securities shall be
purchased, what securities shall be held or sold, and what portion of the Fund's
assets shall be held uninvested, subject always to the provisions of the Trust's
Trust Instrument and By-laws, and of the Investment Company Act, and to the
Fund's investment objectives, policies, and restrictions, and subject further to
such policies and instructions as the Trustees may from time to time establish.

Schroder makes available to the Trust, without additional expense to the
Trust, the services of such of its directors, officers, and employees as may
duly be elected Trustees or officers of the Trust, subject to their individual
consent to serve and to any limitations imposed by law. Schroder pays the
compensation and expenses of officers and executive employees of the Trust.
Schroder also provides investment advisory research and statistical facilities
and all clerical services relating to such research, statistical, and investment
work. Schroder pays the Trust's office rent.

Under the Advisory Agreement, the Trust is responsible for all its other
expenses, including clerical salaries not related to investment activities; fees
and expenses incurred in connection with membership in investment company
organizations; brokers' commissions; payment for portfolio pricing services to a
pricing agent, if any; legal expenses; auditing expenses; accounting expenses;
taxes and governmental fees; fees and expenses of the transfer agent and
investor servicing agent of the Trust; the cost of preparing share certificates
or any other expenses, including clerical expenses, incurred in connection with
the issue, sale, underwriting, redemption, or repurchase of shares; the expenses
of and fees for registering or qualifying securities for sale; the fees and
expenses of the Trustees of the Trust who are not affiliated with Schroder; the
cost of preparing and distributing reports and notices to shareholders; public
and investor relations expenses; and fees and disbursements of custodians of the
Fund's assets. The Trust is also responsible for its expenses

22
<PAGE>

incurred in connection with litigation, proceedings, and claims and the legal
obligation it may have to indemnify its officers and Trustees with respect
thereto.

Schroder's compensation under the Advisory Agreement may be reduced in any
year if the Fund's expenses exceed the limits on investment company expenses
imposed by any statute or regulatory authority of any jurisdiction in which
shares of the Fund are qualified for offer or sale.

The Advisory Agreement provides that Schroder shall not be subject to any
liability for any error of judgment or mistake of law or for any loss suffered
by the Trust in connection with rendering service to the Trust in the absence of
willful misfeasance, bad faith, gross negligence, or reckless disregard of its
duties.

The Advisory Agreement may be terminated without penalty by vote of the
Trustees, by the shareholders of the Fund, or by Schroder on 60 days' written
notice. The Advisory Agreement also terminates without payment of any penalty in
the event of its assignment. In addition, the Advisory Agreement may be amended
only by a vote of the shareholders of the Fund, and the Advisory Agreement
provides that it will continue in effect from year to year only so long as such
continuance is approved at least annually with respect to the Fund by vote of
either the Trustees or the shareholders of the Fund, and, in either case, by a
majority of the Trustees who are not "interested persons" of Schroder. In each
of the foregoing cases, the vote of the shareholders is the affirmative vote of
a "majority of the outstanding voting securities" as defined in the Investment
Company Act.

The Former Related Portfolio

Prior to June 1, 1999, the Fund invested all of its assets in a related
portfolio (the "Former Related Portfolio") having the same investment objective
and substantially the same investment policies as the Fund. As long as the Fund
remained completely invested in the Former Related Portfolio (or any other
investment company), Schroder was not entitled to receive any investment
advisory fee directly from the Fund.

Schroder was the investment adviser to the Former Related Portfolio
pursuant to an investment advisory agreement (the "Portfolio Advisory
Agreement") between Schroder and Schroder Capital Funds, on behalf of the
Portfolio. Schroder received an investment advisory fee with respect to the
Former Related Portfolio. The Portfolio Advisory Agreement was the same in all
material respects as the Advisory Agreement between the Trust on behalf of the
Fund and Schroder. The Fund bore a proportionate part of the investment advisory
fees paid by the Former Related Portfolio (based on the percentage of the Former
Related Portfolio's assets attributable to the Fund's investment).

Recent Investment Advisory Fees.

The following table sets forth the investment advisory fees paid by the
Fund during the three most recent fiscal years, including fees paid indirectly
through the Former Related Portfolio (for periods through May 31, 1999) and
directly to Schroders (since June 1, 1999). The fees listed in the table reflect
reductions pursuant to expense limitations and/or fee waivers in effect during
such periods.

23
<PAGE>

- ------------------------------------------------------------------------
Investment Advisory Investment Advisory Investment Advisory
Fees Paid for Fiscal Fees Paid for Fiscal Fees Paid for Fiscal
Year Ended 10/31/99 Year Ended 10/31/98 Year Ended 10/31/97
- ------------------------------------------------------------------------
$1,372,078 $1,265,439 $1,778,645
- ------------------------------------------------------------------------

Fee Waivers

For the periods shown above, portion of the advisory fees payable to
Schroder (including fees payable by the Former Related Portfolio prior to June
1, 1999) were waived in the following amounts during the three most recent
fiscal years pursuant to expense limitations and/or waivers observed by Schroder
for the Fund during such periods.

- ------------------------------------------------------------------------
Fees Waived During Fees Waived During Fees Waived During
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
10/31/99 10/31/98 10/31/97
- ------------------------------------------------------------------------
$396,154 $496,353 $472,493
- ------------------------------------------------------------------------

ADMINISTRATIVE SERVICES

On behalf of the Fund, the Trust has entered into an administration
agreement with Schroder Fund Advisors Inc., under which Schroder Fund Advisors
Inc. provides management and administrative services necessary for the operation
of the Fund, including: (1) preparation of shareholder reports and
communications; (2) regulatory compliance, such as reports to and filings with
the SEC and state securities commissions; and (3) general supervision of the
operation of the Fund, including coordination of the services performed by its
investment adviser, transfer agent, custodian, independent accountants, legal
counsel and others. Schroder Fund Advisors Inc. is a wholly owned subsidiary of
Schroder and is a registered broker-dealer organized to act as administrator and
distributor of mutual funds.

For providing administrative services Schroder Fund Advisors Inc. is
entitled to receive a monthly fee at the annual rate of 0.10% of the Fund's
average daily net assets. The administration agreement is terminable with
respect to the Fund without penalty, at any time, by the Trustees upon 60 days'
written notice to Schroder Fund Advisors Inc. or by Schroder Fund Advisors Inc.
upon 60 days' written notice to the Trust.

24
<PAGE>

is terminable with respect to the Fund without penalty, at any time, by the
Trust upon 60 days" written notice to State Street or by State Street upon 60
days" written notice to the Trust. Prior to June 1, 1999, Forum Administrative
Services, LLC ("FAdS") provided certain administrative services to the Funds
according to a different fee schedule than the schedule currently payable to
Schroder Fund Advisors Inc. and State Street.

State Street also provides certain accounting services to the Trust. The
Trust compensates State Street on a basis approved by the Trustees.

Recent Administrative Fees.

Prior to June 1, 1999, Forum Administrative Services, LLC ("FAdS")
provided certain administrative services to the Funds. During the three most
recent fiscal years, the Fund paid the following fees to Schroder Fund Advisors
Inc., State Street, and FAdS pursuant to the administration agreement and the
subadministration agreements. The fees listed in the following table reflect
reductions pursuant to fee waivers and expense limitations in effect during such
periods.

- ------------------------------------------------------------------------
Administration Fees Administration Fees Administration Fees
Paid for Fiscal Year Paid for Fiscal Year Paid for Fiscal Year
Ended 10/31/99 Ended 10/31/98 Ended 10/31/97
- ------------------------------------------------------------------------
Schroder Fund Advisors Schroder Fund Schroder Fund
Inc. Advisors Inc. Advisors Inc.
$140,942 $176,172 $225,571

FAdS $35,119 FAdS $264,261 FAdS $325,948

State Street $93,727 N/A N/A
- ------------------------------------------------------------------------

DISTRIBUTOR

Pursuant to a Distribution Agreement with the Trust, Schroder Fund
Advisors Inc. (the "Distributor"), 787 Seventh Avenue, New York, New York 10019,
serves as the distributor for the Trust's continually offered shares. The
Distributor pays all of its own expenses in performing its obligations under the
Distribution Agreement. The Distributor is not obligated to sell any specific
amount of shares of the Fund. Please see "Schroder and its Affiliates" for
ownership information regarding the Distributor.

Distribution Plan for Advisor Shares. The Fund has adopted a Distribution
Plan under Rule 12b-1 of the Investment Company Act pursuant to which the Fund
may pay the Distributor compensation in an amount limited in any fiscal year to
the annual rate of 0.25% of the Fund's average daily net assets attributable to
Advisor Shares. The Trustees have not authorized any payments under the
Distribution Plan, although they may at any time authorize payments at an annual
rate of up to 0.50% of the Fund's average daily net assets attributable to
Advisor Shares. The Distribution Plan also relates to payments made pursuant to
the Trust's Shareholder Servicing Plan for Advisor Shares (which will not exceed
the annual rate of 0.25% of the Fund's average

25
<PAGE>

daily net assets attributable to Advisor Shares), to the extent such payments
may be deemed to be primarily intended to result in the sale of the Fund's
Advisor Shares. See "Shareholder Servicing Plan for Advisor Shares" below.

The various costs and expenses that may be paid or reimbursed under the
Distribution Plan include advertising expenses, costs of printing prospectuses
and other materials to be given or sent to prospective investors, expenses of
sales employees or agents of the Distributor, including salary, commissions,
travel and related expenses in connection with the distribution of Advisor
Shares, payments to broker-dealers who advise shareholders regarding the
purchase, sale, or retention of Advisor Shares, and payments to banks, trust
companies, broker-dealers (other than the Distributor), or other financial
organizations.

The Distribution Plan may not be amended to increase materially the amount
of distribution expenses permitted thereunder without the approval of a majority
of the outstanding Advisor Shares of the Fund. Any other material amendment to a
Distribution Plan must be approved both by a majority of the Trustees and a
majority of those Trustees ("Qualified Trustees") who are not "interested
persons" (as defined in the Investment Company Act) of the Trust, and who have
no direct or indirect financial interest in the operation of the Distribution
Plan or in any related agreement, by vote cast in person at a meeting called for
the purpose. The Distribution Plan will continue in effect for successive
one-year periods provided each such continuance is approved by a majority of the
Trustees and the Qualified Trustees by vote cast in person at a meeting called
for the purpose. The Distribution Plan may be terminated at any time by vote of
a majority of the Qualified Trustees or by vote of a majority of the Fund's
outstanding Advisor Shares.

Shareholder Servicing Plan for Advisor Shares. The Fund has also adopted a
Shareholder Servicing Plan (the "Service Plan") for its Advisor Shares. Under
the Service Plan, the Fund pays fees to the Distributor at an annual rate of up
to 0.25% of the average daily net assets of the Fund attributable to its Advisor
Shares. The Distributor may enter into shareholder service agreements with
Service Organizations pursuant to which the Service Organizations provide
administrative support services to their customers who are Fund shareholders.

In return for providing these support services, a Service Organization may
receive payments from the Distributor at a rate not exceeding 0.25% of the
average daily net assets of the Advisor Shares of the Fund for which the Service
Organization is the Service Organization of record. These administrative
services may include, but are not limited to, the following functions:
establishing and maintaining accounts and records relating to clients of the
Service Organization; answering shareholder inquiries regarding the manner in
which purchases, exchanges, and redemptions of Advisor Shares of the Trust may
be effected and other matters pertaining to the Trust's services; providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records; assisting shareholders in arranging for processing
purchase, exchange, and redemption transactions; arranging for the wiring of
funds; guaranteeing shareholder signatures in connection with redemption orders
and transfers and changes in shareholder-designated accounts; integrating
periodic statements with other customer transactions; and providing such other
related services as the shareholder may request. Some Service Organizations may
impose additional conditions or fees, such as requiring clients to invest more
than the minimum amounts required by the Trust for initial or subsequent
investments or charging a direct fee for services. Such fees would be in
addition to any amounts which might be paid to the Service Organization by the
Distributor. Please contact your Service Organization for details.

26
<PAGE>

The following table shows the aggregate amounts paid by the Fund to the
Distributor under the Service Plan during the three most recent fiscal years.
All of such amounts were, in turn, repaid by the Distributor to Service
Organizations.

- ------------------------------------------------------------------------
Fees Paid Pursuant to Fees Paid Pursuant Fees Paid Pursuant to
Service Plan During to Service Plan Service Plan During
Fiscal Year Ended During Fiscal Year Fiscal Year Ended
10/31/99 Ended 10/31/98 10/31/97
- ------------------------------------------------------------------------
$70,375 $58,775 $43,522
- ------------------------------------------------------------------------

BROKERAGE ALLOCATION AND OTHER PRACTICES

Schroder may place portfolio transactions with broker-dealers which
furnish, without cost, certain research, statistical, and quotation services of
value to Schroder and its affiliates in advising the Fund and other clients,
provided that it shall always seek best price and execution with respect to
transactions. Certain investments may be appropriate for the Fund and for other
clients advised by Schroder. Investment decisions for the Fund and other clients
are made with a view to achieving their respective investment objectives and
after consideration of such factors as their current holdings, availability of
cash for investment, and the size of their investments generally. Frequently, a
particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients of Schroder on the same
day. In such event, such transactions will be allocated among the clients in a
manner believed by Schroder to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Fund. Purchase and sale orders for the Fund may be
combined with those of other clients of Schroder in the interest of achieving
the most favorable net results for the Fund.

Brokerage and Research Services. Transactions on U.S. stock exchanges and
other agency transactions involve the payment by the Fund of negotiated
brokerage commissions. Such commissions vary among different brokers. Also, a
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. Transactions in foreign securities
often involve the payment of fixed brokerage commissions, which are generally
higher than those in the United States, and therefore certain portfolio
transaction costs may be higher than the costs for similar transactions executed
on U.S. securities exchanges. There is generally no stated commission in the
case of securities traded in the over-the-counter markets, but the price paid by
the Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.

Schroder places all orders for the purchase and sale of portfolio
securities and buys and sells securities through a substantial number of brokers
and dealers. In so doing, it uses its best efforts to obtain the best price and
execution available. In seeking the best price and execution, Schroder considers
all factors it deems relevant, including price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction (taking into

27
<PAGE>

account market prices and trends), the reputation, experience, and financial
stability of the broker-dealer involved, and the quality of service rendered by
the broker-dealer in other transactions.

It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research, statistical, and quotation services from broker-dealers
that execute portfolio transactions for the clients of such advisers. Consistent
with this practice, Schroder receives research, statistical, and quotation
services from many broker-dealers with which it places the Trust's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities, and recommendations as
to the purchase and sale of securities. Some of these services are of value to
Schroder and its affiliates in advising various of their clients (including the
Fund), although not all of these services are necessarily useful and of value in
managing the Fund. The investment advisory fee paid by the Fund is not reduced
because Schroder and its affiliates receive such services.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, as
amended (the "Securities Exchange Act"), and by the Advisory Agreement, Schroder
may cause the Fund to pay a broker that provides brokerage and research services
to Schroder an amount of disclosed commission for effecting a securities
transaction for the Fund in excess of the commission which another broker would
have charged for effecting that transaction. Schroder's authority to cause the
Fund to pay any such greater commissions is also subject to such policies as the
Trustees may adopt from time to time.

To the extent permitted by law, the Fund may engage in brokerage
transactions with Schroder & Co. Inc. ("Schroder & Co."), which is an affiliate
of Schroder, or with unaffiliated brokers who trade or clear through Schroder &
Co. or Lewco Securities Corp. ("Lewco"), another affiliate of Schroder, to
effect securities transactions on U.S. exchanges, or Schroder Securities Limited
and its affiliates (collectively, "Schroder Securities"), affiliates of
Schroder, to effect securities transactions on various foreign securities
exchanges on which Schroder Securities has trading privileges. Consistent with
regulations under the Investment Company Act, the Fund has adopted procedures
which are reasonably designed to provide that any commissions or other
remuneration the Funds pay to any affiliated broker do not exceed the usual and
customary broker's commission. The procedures require periodic review of these
transactions by the Trustees. In addition, the Fund will adhere to the rule,
under the Securities Exchange Act, governing floor trading. This rule permits
the Fund to effect, but not execute, exchange listed securities transactions
with an affiliated broker that pays a portion of the brokerage commissions it
receives from the Fund to the brokers executing the transactions. Also, due to
securities law limitations, the Fund may be required to limit purchases of
securities in a public offering if Schroder & Co., Lewco, Schroder Securities,
or one of their affiliates is a member of the syndicate for that offering.

The Fund does not have any understanding or arrangement to direct any
specific portion of its brokerage to Schroder & Co., Lewco, or Schroder
Securities, and will not direct brokerage to Schroder & Co., Lewco, or Schroder
Securities in recognition of research services.

The following table shows the aggregate brokerage commissions paid by the
Fund for the three most recent fiscal years. The amounts listed represent
aggregate brokerage commissions paid by the Former Related Portfolio and the
Fund. The Fund paid no brokerage commission to Schroder & Co., Lewco, or
Schroder Securities in the three most recent fiscal years.

28
<PAGE>

- ------------------------------------------------------------------------
Brokerage
Brokerage Commissions Commissions Paid Brokerage Commissions
Paid During Fiscal Year During Fiscal Year Paid During Fiscal
Ended 10/31/99 Ended 10/31/98 Year Ended 10/31/97
- ------------------------------------------------------------------------
$1,056,676 $1,013,671 $1,413,998
- ------------------------------------------------------------------------

For the fiscal year ended October 31, 1999, the Fund paid $10,538 in
brokerage commissions to brokers and dealers in transactions identified as
having been executed on the basis of research and other services provided by the
broker or dealer, which amount represented approximately 1.2 % of the total
brokerage commissions paid by the Fund.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each class of shares of the Fund are
determined daily as of the close of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern Time) on each day the Exchange is open for trading.

The Trustees have established procedures for the valuation of the Fund's
securities, which are summarized as follows:

Equities listed or traded on a domestic or foreign stock exchange
(including the National Association of Securities Dealers' Automated Quotation
System ("NASDAQ")) for which last sales information is regularly reported are
valued at their last reported sales prices on such exchange on that day or, in
the absence of sales that day, such securities are valued at the mean of closing
bid and ask prices ("mid-market price") or, if none, the last sales price on the
preceding trading day. (Where the securities are traded on more than one
exchange, they are valued on the exchange on which the security is primarily
traded.) Securities purchased in an initial public offering and which have not
commenced trading in a secondary market are valued at cost. Unlisted securities
for which over-the-counter market quotations are readily available generally are
valued at the most recently reported mid-market prices. Fixed income securities
with remaining maturities of more than 60 days are valued on the basis of
valuations provided by pricing services that determine valuations for normal
institutional size trading units of fixed income securities, or through
obtaining independent quotes from market makers. Short-term fixed income
securities with remaining maturities of 60 days or less are valued at amortized
cost, which approximates market value, unless Schroder believes another
valuation is more appropriate. Securities for which current market quotations
are not readily available are valued at fair value pursuant to procedures
established by the Trustees.

Long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities, and certain foreign securities may be stated at fair value on the
basis of valuations furnished by pricing services approved by the Trustees,
which determine valuations for normal, institutional-size trading units of such
securities using methods based on market transactions for comparable securities.

29
<PAGE>

If any securities held by the Fund are restricted as to resale, Schroder
will obtain a valuation based on the current bid for the restricted security
from one or more independent dealers or other parties reasonably familiar with
the facts and circumstances of the security. If Schroder is unable to obtain a
fair valuation for a restricted security from an independent dealer or other
independent party, a pricing committee (comprised of certain directors and
officers at Schroder) shall determine the bid value of such security. The
valuation procedures applied in any specific instance are likely to vary from
case to case. However, consideration is generally given to the financial
position of the issuer and other fundamental analytical data relating to the
investment and to the nature of the restrictions on disposition of the
securities (including any registration expenses that might be borne by the Trust
in connection with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities, and any available
analysts' reports regarding the issuer.

Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of these securities used in determining the net
asset value of the Trust's shares are computed as of such times. Also, because
of the amount of time required to collect and process trading information as to
large numbers of securities issues, the values of certain securities (such as
convertible bonds and U.S. Government securities) are determined based on market
quotations collected earlier in the day at the latest practicable time prior to
the close of the Exchange. Occasionally, events affecting the value of such
securities may occur between such times and the close of the Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value, in the manner described
above.

The proceeds received by the Fund for each issue or sale of its shares,
and all income, earnings, profits, and proceeds thereof, subject only to the
rights of creditors, will be specifically allocated to the Fund, and constitute
the underlying assets of the Fund. The underlying assets of the Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of the Fund and with a share of the general liabilities
of the Trust. The Fund's assets will be further allocated among its constituent
classes of shares on the Fund's books of account. Expenses with respect to any
two or more series of the Trust or classes may be allocated in proportion to the
net asset values of the respective series or classes except where allocations of
direct expenses can otherwise be fairly made to a specific series or class.

REDEMPTIONS IN KIND

The Trust had agreed to redeem shares of the Fund solely in cash up to the
lesser of $250,000 or 1% of the Fund's net assets during any 90-day period for
any one shareholder. In consideration of the best interests of the remaining
shareholders, the Trust may pay any redemption proceeds exceeding this amount in
whole or in part by a distribution in kind of securities held by the Fund in
lieu of cash. The Trust does not expect to redeem shares in kind under normal
circumstances. If your shares are redeemed in kind, you should expect to incur
transaction costs upon the disposition of the securities received in the
distribution.

30
<PAGE>

TAXES

The Fund intends to qualify each year and elect to be taxed as a regulated
investment company under Subchapter M of the United States Internal Revenue Code
of 1986, as amended (the "Code").

As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, the Fund will not be subject to federal income
tax on any of its net investment income or net realized capital gains that are
distributed to shareholders. In order to qualify as a "regulated investment
company," the Fund must, among other things, (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, gains from the sale or other dispositions of stock, securities, or
foreign currencies, and other income (including gains from options, futures, or
forward contracts) derived with respect to its business of investing in such
stock, securities, or currencies, and (b) diversify its holdings so that, at the
close of each quarter of its taxable year, (i) at least 50% of the value of its
total assets consists of cash, cash items, U.S. Government securities, and other
securities limited generally with respect to any one issuer to not more than 5%
of the total assets of the Fund and not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any issuer (other than U.S. Government
securities).

If the Fund fails to distribute in a calendar year substantially all of
its ordinary income for such year and substantially all of its capital gain net
income for the one-year period ending October 31 (or later if the Fund is
permitted so to elect and so elects), plus any retained amount from the prior
year, that Fund will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by the Fund in January of a year generally is
deemed to have been paid by the Fund on December 31 of the preceding year, if
the dividend was declared and payable to shareholders of record on a date in
October, November, or December of that preceding year. The Fund intends
generally to make distributions sufficient to avoid imposition of the 4% excise
tax. In order to receive the favorable tax treatment accorded regulated
investment companies and their shareholders, moreover, the Fund must in general
distribute with respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and, the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year.

The Fund's distributions will be taxable to you as ordinary income to the
extent derived from the Fund's investment income and net short-term gains (that
is, net gains from capital assets held for no more than one year). Distributions
designated by the Fund as deriving from net gains on capital assets held for
more than one year will be taxable to you as long-term capital gains (generally
subject to a 20% tax rate), regardless of how long you have held the shares.
Distributions will be taxable to you as described above whether received in cash
or in shares through the reinvestment of distributions. Early in each year the
Trust will notify each shareholder of the amount and tax status of distributions
paid to the shareholder by the Fund for the preceding year. Dividends and
distributions on the Fund's shares are generally subject to federal income tax
as described herein to the extent they do not exceed the Fund's realized income
and gains, even though such dividends and distributions may economically
represent a return of a particular shareholder's investment. Such distributions
are likely to occur in respect of shares purchased at a time when the Fund's net
asset value reflects gains that are either unrealized, or realized but not
distributed. Such realized gains may be required to be distributed even when the
Fund's net asset value also reflects unrealized losses.

31
<PAGE>

Upon the disposition of shares of the Fund (whether by sale, exchange, or
redemption), a shareholder will realize a gain or loss. Such gain or loss will
be capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term or short-term generally depending upon the
shareholder's holding period for the shares. Long-term capital gains will
generally be taxed at a federal income tax rate of 20%. Any loss realized by a
shareholder on a disposition of shares held by the shareholder for six months or
less will be treated as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the shareholder with respect
to such shares. In general, any loss realized upon a taxable disposition of
shares will be treated as long-term capital loss if the shares have been held
for more than one year, and otherwise as short-term capital loss. In addition,
any loss realized on a sale or exchange of shares will be disallowed to the
extent that you replace the disposed of shares with shares of the same or
another Fund within a period of 61 days beginning 30 days before and ending 30
days after the date of disposition.

With respect to investment income and gains received by the Fund from
sources outside the United States, such income and gains may be subject to
foreign taxes which are withheld at the source. The effective rate of foreign
taxes to which the Fund will be subject depends on the specific countries in
which its assets will be invested and the extent of the assets invested in each
such country and, therefore, cannot be determined in advance. In addition, the
Fund's investments in foreign securities or foreign currencies may increase or
accelerate the Fund's recognition of ordinary income and may affect the timing
or amount of the Fund's distributions.

If a Fund is liable for foreign taxes, and if more than 50% of the value
of the Fund's total assets at the close of its taxable year consists of stocks
or securities of foreign corporations, the Fund may make an election to permit
its shareholders to claim a credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the Fund to foreign countries.
In such a case, shareholders would include in gross income from foreign sources
their pro rata share of such taxes. Shareholders then may take a foreign tax
credit against their U.S. federal income tax liability for the amount of such
foreign taxes or else deduct such foreign taxes as an itemized deduction from
gross income, subject to certain limitations (including, with respect to a
foreign tax credit, a holding period requirement).

If the Fund engages in hedging transactions, including hedging
transactions in options, futures contracts, and straddles, or other similar
transactions, it will be subject to special tax rules (including constructive
sale, mark to market, straddle, wash sale, and short sale rules), the effect of
which may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, or convert short
term capital losses into long term capital losses. These rules could therefore
affect the amount, timing and character of distributions to shareholders. The
Fund will endeavor to make any available elections pertaining to such
transactions in a manner believed to be in the best interests of the Fund.

Under federal income tax law, a portion of the difference between the
purchase price of zero-coupon securities in which the Fund has invested and
their face value ("original issue discount") is considered to be income to the
Fund each year, even though the Fund will not receive cash interest payments
from these securities. This original issue discount (imputed income) will
comprise a part of the net investment income of the Fund which must be
distributed to shareholders in order to maintain the qualification of the Fund
as a regulated investment company and to avoid federal income tax at the level
of the Fund.

32
<PAGE>

The Fund may be required to withhold 31% of certain of your dividends if
you have not provided the Fund with your correct taxpayer identification number
(normally your Social Security number), or if you are otherwise subject to back
up withholding.

This discussion of the federal income tax and state tax treatment of the
Trust and its shareholders is based on the law as of the date of this SAI. The
foregoing is primarily a summary of certain federal tax consequences of
investing in the Fund. You should consult your tax advisor for more information
about your own tax situation, including possible state and local taxes.

PRINCIPAL HOLDERS OF SECURITIES

To the knowledge of the Trust, as of February 18, 2000, no person owned
beneficially 25% or more of the outstanding voting securities of the Fund,
except as indicated below. These persons may be deemed to control the noted
Funds. The Trust is not aware of any other person that may control the Fund.

To the knowledge of the Trust, as of February 18, 2000, the Trustees of
the Trust and the officers of the Trust, as a group, owned less than 1% of the
outstanding shares of either class of the Fund.

To the knowledge of the Trust, as of February 18, 2000, no other person
owned of record or beneficially more than 5% of the outstanding Investor or
Advisor Shares of the Fund, except as set forth below.

Percentage of Outstanding
-------------------------
Record or Beneficial Owner Class Shares of Class Owned
- -------------------------- ----- ---------------------
The Robert Wood Johnson Investor 22.82%
Foundation
Attn: John Gilliam
P.O. Box 2316
College Road at Rt. One
Princeton, NJ 08543-2316

University of Chicago Investor 18.12%
ATTN KATHY HSU
450 N Cityfront Plaza Drive
Suite 440
Chicago, IL 60611-5508

State Street Bank & Trust Co. Investor 6.19%
The Merck Company Foundation
One Merck Drive
PO Box 300 WS 3AF-05
Whitehouse Station, NJ
08889-0100

33
<PAGE>

The California Endowment Investor 31.27%
ATTN ALEX HSIAO
21650 Oknard Street
Suite 1200
Woodland Hills, CA 91367-7815

Banc of America Securities LLC Advisor 89.03%
ATTN: MUTUAL FUND DEPT.
600 Montgomery Street
San Francisco, CA 94111-2702

Jupiter & Co Advisor 10.06%
C/o Investors Bank & Trust
PO Box 9130 FPG90
Boston, MA 02117-9130

PERFORMANCE INFORMATION

Average annual total return of a class of shares of the Fund for one-,
five-, and ten-year periods (or for such shorter periods as shares of that class
of shares of the Fund have been offered) is determined by calculating the actual
dollar amount of investment return on a $1,000 investment in that class of
shares at the beginning of the period, and then calculating the annual
compounded rate of return which would produce that amount. Total return for a
period of one year or less is equal to the actual return during that period.
Total return calculations assume reinvestment of all Fund distributions at net
asset value on their respective reinvestment dates. Total return may be
presented for other periods.

All performance data is based on past investment results and does not
predict future performance. Investment performance of a particular class of the
Fund's shares, which will vary, is based on many factors, including market
conditions, the composition of the Fund's portfolio, and the Fund's operating
expenses attributable to that class of shares. Investment performance also often
reflects the risks associated with the Fund's investment objectives and
policies. Quotations of yield or total return for any period when an expense
limitation is in effect will be greater than if the limitation had not been in
effect. These factors should be considered when comparing the investment results
of the Fund's shares to those of various classes of other mutual funds and other
investment vehicles. Performance for the Fund's shares may be compared to
various indices.

The table below sets forth the average annual total return of Investor
Shares of the Fund for the one-year period ended October 31, 1999, and for the
period from the commencement of the Fund's operations until October 31, 1999.
The table also sets forth average annual total return information for the Fund's
Advisor Shares, which includes estimated pro forma information based on the
performance of the Fund's Investor Shares for periods prior to the inception
date of Advisor Shares. Such prior performance has been recalculated to reflect
the actual fees and expenses

34
<PAGE>

attributable to Advisor Shares. BECAUSE THE EXPENSES ATTRIBUTABLE TO THE FUND'S
ADVISOR SHARES ARE HIGHER THAN THOSE ATTRIBUTABLE TO ITS INVESTOR SHARES, THE
PERFORMANCE OF THE FUND'S ADVISOR SHARES WILL NORMALLY BE LESS THAT THE
PERFORMANCE OF ITS INVESTOR SHARES OVER THE SAME PERIOD.

Average Annual Total Return for Periods Ended October 31, 1999

- --------------------------------------------------------------------------------
Since Inception
of Fund Inception Inception
Class 1 Year (Annualized) Date of Fund Date of Class
- --------------------------------------------------------------------------------
Investor Shares 36.27% 1,42% 3/31/95 3/31/95

Advisor Shares* 36.05% 1.51% 11/21/96
- --------------------------------------------------------------------------------

* Total return for Advisor Shares of the Fund reflects pro forma information
(based on Investor Share performance) through November 20, 1996, and
actual total return from November 21, 1996 (the inception date of Advisor
Shares of the Fund) through October 31, 1999. The actual total return of
Advisor Shares of the Fund from November 21, 1996 through October 31, 1999
was 2.06%.

From time to time, Schroder, State Street or any of their affiliates that
provide services to the Fund may reduce their compensation or assume expenses of
the Fund in order to reduce the Fund's expenses, as described in the Fund's
current Prospectuses. Any such waiver or assumption would increase the Fund's
total return for each class of shares during the period of the waiver or
assumption.

CUSTODIAN

State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the custodian of the assets of the Fund. The custodian's
responsibilities include safeguarding and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments. The custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Boston Financial Data Services, Inc., 66 Brooks Drive, Braintree,
Massachusetts 02184, is the Trust's registrar, transfer agent and dividend
disbursing agent.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, the Trust's independent accountants, provide
audit services and tax return preparation services. Their address is One Post
Office Square, Boston, Massachusetts 02109.

35
<PAGE>

LEGAL COUNSEL

Ropes & Gray, One International Place, Boston, Massachusetts 02110-2624,
serves as counsel to the Trust.

SHAREHOLDER LIABILITY

Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Trust Instrument disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees.
The Trust's Trust Instrument provides for indemnification out of the Fund's
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund would be unable to meet its obligations.

FINANCIAL STATEMENTS

The Report of Independent Accountants, financial highlights, and financial
statements of the Fund are included in the Fund's Annual Report to Shareholders
for the fiscal year ended October 31, 1999 on Form N-30D under the Investment
Company Act, filed electronically with the Securities and Exchange Commission on
December 30, 1999 (File No. 811-1911; Accession Number: 0000912057-99-011046).
That information is incorporated by reference into this Statement of Additional
Information.

36
<PAGE>

APPENDIX A

RATINGS OF CORPORATE DEBT INSTRUMENTS

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")

FIXED-INCOME SECURITY RATINGS

Fixed-income securities rated "Aaa", "Aa", "A" and "Baa" are considered
investment grade.

"Caa" Fixed-income securities which are rated "Caa" are of poor standing. Such
issues may be in default or there may be present elements of danger with respect
to principal or interest.

"Ca" Fixed-income securities which are rated "Ca" present obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

A-1
<PAGE>

Rating Refinements: Moody's may apply numerical modifiers, "1", "2", and "3" in
each generic rating classification from "Aa" through "B" in its municipal
fixed-income security rating system. The modifier "1" indicates that the
security ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and a modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper ratings are opinions of the ability to repay punctually
promissory obligations not having an original maturity in excess of nine months.
The ratings apply to Municipal Commercial Paper as well as taxable Commercial
Paper. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
"Prime-1", "Prime-2", "Prime-3".

Issuers rated "Prime-1" have a superior capacity for repayment of short-term
promissory obligations. Issuers rated "Prime-2" have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated "Prime-3" have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated "Not Prime" do not fall within any of the Prime rating categories.

STANDARD & POOR'S RATINGS SERVICES ("STANDARD & POOR'S")

FIXED-INCOME SECURITY RATINGS

Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability of,
such information, or for other reasons.

"AAA" Fixed-income securities rated "AAA" have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal is extremely
strong.

"AA" Fixed-income securities rated "AA" have a very strong capacity to pay
interest and repay principal and differs from the highest-rated issues only in
small degree.

A-2
<PAGE>

fixed-income securities in this category than for fixed-income securities in
higher-rated categories.

Fixed-income securities rated "AAA", "AA", "A" and "BBB" are considered
investment grade. "BB" Fixed-income securities rated "BB" have less near-term
vulnerability to default than other speculative grade fixed-income securities.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to inadequate capacity or
willingness to pay interest and repay principal.

"CC" The rating "CC" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or implied "CCC" rating.

"C" The rating "C" is typically applied to fixed-income securities subordinated
to senior debt which is assigned an actual or implied "CCC-" rating.

"CI" The rating "CI" is reserved for fixed-income securities on which no
interest is being paid.

"NR" Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.

Fixed-income securities rated "BB", "B", "CCC", "CC" and "C" are regarded
as having predominantly speculative characteristics with respect to capacity to
pay interest and repay principal. "BB" indicates the least degree of speculation
and "C" the highest degree of speculation. While such fixed-income securities
will likely have some quality and protective characteristics, these are
out-weighed by large uncertainties or major risk exposures to adverse
conditions.

Plus (+) or minus (-): The rating from "AA" TO "CCC" may be modified by
the addition of a plus or minus sign to show relative standing with the major
ratings categories.

COMMERCIAL PAPER RATINGS

Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.

"A-1" Indicates that the degree of safety regarding timely payment is very
strong.

A-3
<PAGE>

"A-2" Indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".

A-4